"The departed spirits of the Dunmeri, and perhaps those of all races, persist after death. The knowledge and power of departed ancestors benefits the bloodlines of Dunmeri Houses. The bond between the living family members and immortal ancestors is partly blood, partly ritual, partly volitional." --Ancestors and the Dunmer
The Dunmer believe the spirits of the dead live on in our world. They can know and affect the future, and can speak with other spirits, so the Dunmer honor them and gift them, and ask them for aid and protection. Strong spirits of heroes and wise women preserve the wisdom and honor of the race. The worst spirits are evil and harmful, called ghosts, devils and daemons. The oldest and greatest ancestor spirits are the Daedra, which are powerful, but dangerous and hard to understand. It is a family's most solemn duty to make sure their ancestor's remains are interred properly in a City of the Dead such as Necrom. Here the spirits draw comfort from one another against the chill of the mortal world. However, as a sign of great honor and sacrifice, an ancestor may grant that part of his remains be retained to serve as part of a ghost fence protecting the clan's shrine and family precincts.
On a larger scale, the Great Ghostfence around Red Mountain created by the Tribunal to hold back the Blight, incorporates the bones of many heroes of the Temple and of House Indoril and Redoran who dedicated their spirits to the Temple and Clan as their surrogate families. The Ghostfence also contains bones taken from the Catacombs of Necrom and the many battlefields of Morrowind.