The Battlefield is separated by a small river (with three bridges), with the Gnomes on the south side (by Tree Gnome Village), and the Khazard troopers on the north side. This area plays a large role in Tree Gnome Village quest. The gnomes and troopers are often seen to be engaged in battles with each other. Players are free to support either side in the battle.
The Khazard fortress is to the north of the Tree Gnome Village, despite the entirety of Khazard's domain being to the south-east of the village.
This is also one of the few places in the game where you can see various NPC battles, similar to the God Wars Dungeon and Goblin Village.
From the appearance of the battlefield and the condition that the fortress is in, one can assume that the Gnomes are winning the battle. Also, the Gnomes appear to outnumber and perhaps outmatch Khazard's troops despite the Gnomes' low levels.