The story centers around The Union - a kingdom somewhat resembling Europe a few centuries ago - warring factions, mercantile guilds & threatened borders. It has a rigid social hierarchy / caste system which remains ever present in the consciousness of those at the bottom of the structure. The underlying and long term story arc seems to be based on the premise of a barbarian versus civilization theme - The Union is threatened by Bethod - a Mance Raider type military leader who unites the warring tribes of the north. He has created a common enemy (The Union) and is preparing to march his horde south. Also coming south is Logen Ninefingers - a barbarian at odds with Bethod who is at the losing end of a battle and breaks from his fellow warriors who think him dead. Logen is also known as 'bloody nine' alluding to a finger he violently lost. At the end of the book are we treated to witness his art of violence.
On his way south Logen encounters Bayaz - an ancient wizard (or possibly a charlatan) - mischievous and sharp witted, yet capable of impressing, Bayaz educates Logen on urban life and is accepted by the barbarian as a man of worth when he stares down Bethod and declines to join the march of the northern clan. Bayaz becomes more likable when he gives silver tongued arch lector politicians as good as he gets and backs up his words with action.
In The Union we are introduced to Sand dan Glokta - extraordinary interrogator. A high achiever - Glokta was a champion swordsman and a survivor of torture as a prisoner of an earlier war. Having survived and thrived against all odds & expectations he now serves The Union as an interrogator and torturer. His abilities bring him to the attention of powerful politicians who he suspects are using him for their personal gains and to settle vendettas. Glokta enjoys the game despite being a step behind, and relishes the ugly aspects of life. Also, Glokta is now a cripple who has trouble peeing standing up and sometimes shits the bed.
Also in The Union we meet another expert swordsman Jezal dan Luthar - training for a national tournament while falling for his senior's sister who he cannot have a future with because of differences in their social status. His senior - Collem West also struggles with the compromises he's made to carve a place for himself in the socially stratified Union.
The book reads life an introduction to these and a few more characters and their backstories, with whispers of legends and history in conversations. They move forward, some of them together in an untested association, other alone, to stay afloat in a high stakes game of war and politics in which they are somewhere between player and pawn.
The Blade Itself doesn't take the grim-dark sub-genre of fantasy fiction to another level. It is stripped of old ideas of heroism and romance but it doesn't introduce enough fresh events, grit and politics. Glokta's backstory sounds intriguing, as does Logen's and Bayaz', but we aren't given more than a few details. There is a magic system with time dilation and some reality bending physics but other than establishing Bayaz' credentials and lending a sense of legends past the book doesn't have much use for it yet.
The book excels in introducing the characters and leading the reader into the next books in the trilogy. There are several threads not just of the characters but also of world building that are left unexplained.