All characters begin the game as neutral. Eventually, they will discover a 'Good News Pamphlet', which will ask them to either  Agree or [A] Disagree with the content of the pamphlet. Depending on the faction that authored the pamphlet, agreeing will shift the player's standing one notch in support of the faction that published the pamphlet. Upon reaching a faction score of 3, 6(?), and 9(?), the player will be awarded with a large sum of gold and a level-appropriate item drop.
Getting the Blacksmith to 'Imbue' your weapon will automatically convert it to your faction for a price, causing a +20% increase in damage.
Neutral [NEU] Edit
All players begin the game as neutral until they encounter their first pamphlet. Since each pamphlet requires the character to support either The Brotherhood or The Reisistance, it is very difficult to remain neutral. Players should choose one of the two factions, and use pamphlets as a means to increase standing with their chosen faction. Using the 'Imbue' function of The Blacksmith will convert non-faction weapons into faction weapons for a 20% damage bonus at the cost of some gold.
The Brotherhood [BRO] Edit
Followers of the Great One. The Brotherhood values obedience, loyalty, and remaining free from sin.
The Resistance [RES] Edit
In opposition to the Great One. The Resistance values critical thinking, greed, and ambition.