Lavender Town started out as one of the many graveyards dotted around Kanto. Up until the 18th century, when the advancement of technologies resulted in many Pokemon graves being moved around to accommodate, it wasn't well known. However, in despair of their Pokemon, many trainers went on a pilgrimage to find a safe place away from the technological world of Kanto in order to bury their Pokemon. There are also rumors of children coming to Lavender Town specifically to commit suicide.
Their journey was not in vain, for they found a quiet location secreted in the mountains. The air was fresh and the mountains protected the majority of the graves from the elements. These made it the perfect place, and due to the large amount of pilgrims making their way through, a small community developed into what is now called Lavender Town. The name is derived from the discovery of lavender plants that were discovered among the graves, a flower that is rare anywhere else.
The town is infamous for it's melancholy nature, as it is essentially a giant graveyard, and visitors have reported an odd gloom that seems to permeate the very air itself. Urban legend states that suicide rates in the community are abnormally high, especially among new arrivals, but there are no facts backing this up.
Lavender Town is situated at the end of the dark Rock Tunnel, with Saffron City to the west, and the bridge leading towards Vermillion and Fuchia City to the south, with the east being nothing but mountains and eventually the ocean. Aside from Pokemon Tower, there is very little of note in the area, with the only notable exceptions being that famed researcher Mr Fuji, and the self-proclaimed Name Rater living there.
Pokemon Tower is one of the most iconic landmarks of the Kanto region, and one with an unusually unsettling legend. The tower began life inside a hidden cliff-face, and over the course of decades grew into a towering monument to the Pokemon interred within. However, it became associated with ghosts and supernatural activity very early on in it's existance, even before the tower had been finished, with many of it's workers claiming they heard voices coming from inside. Soon after, Ghost-type Pokemon began appearing in the tower, drawn by the cemetary and whatever strange qualities the tower exhibited.
One of the most infamous incidents associated with the tower was the so-called Rocket Invasion. During the height of Team Rockets reign of terror in Kanto, they kidnapped the famous Pokemon researcher Mr Fuji and occupied the tower, ruthlessly killing several of the Pokemon living in the area. This coincided with a spike of reported supernatural activity, with many of the shrine nuns exhibiting behavior similar to possesion, and the Ghost Pokemon becoming hostile. The situation was resolved when the now legendary Pokemon trainer Red confronted an invisible entity barring off the upper floors of the tower using a technological device Team Rocket had stolen from Silph.Co, and afterwards rescuring Fuji from the remaining Rocket agents at the top. The exact details to this event remains unconfirmed, but things returned to normal immediatly afterwards.
Following the Rocket Invasion and it's ensuing chaos, the decision was made to decomission the tower, with the building being rebuilt as a radio tower. The remains of the Pokemon were moved to a sanctuary run by Mr Fuji, with the majority of them being interred in sanctified catacombs underneath the town. No supernatural activity has been reported in the area since, and even the Ghost Pokemon appear to have moved on.