The first Night's Edge was crafted by Xyvareth in an attempt to seal the Hallow. However, by doing this he partially sealed away the Corruption as well. Maxx has already gathered half of the swords needed to create it and is currently working toward finding the Fiery Greatsword in the desert.
The Night's Edge is used to seal away the corruption and give the Dryads more power by reviving the hallow. It is expected that when used it will restore power to the races, end the war, and bring peace to the world.