Chalice introduces an apparently feudal world in which "Masters" are tied somehow to their land, and keep the land healthy through the aid of their "Circle", of which the "Chalice" is a member. Each member has a different ability and role in keeping balance through the land, although the only role we actually see anything of is that of the Chalice, as might be anticipated from the novel's title. Over all the Masters sits the "Overlord" (if I remember correctly; I don't have a copy of the book on hand), although how exactly he fits into all this is unclear. In addition there are priesthoods for each element, in which the priests gradually become the element they serve--or something along those lines. As with the Overlord, it's never made clear what exactly the priesthoods are or what function they serve.
This opaqueness of the society probably my main frustration with the book: unlike most of McKinley's other works, where we're given plenty of glimpses into how the featured society functions and often even how it came to be that way, here she gives us so little that it feels like tunnel vision. Some of that is probably due to the unreliable narrator, but the whole story feels cramped and isolated, more dream than story. Like it should either be significantly longer or shorter.
Which is not to say it isn't worth reading: I enjoyed it very much. It's just that when I reached the end I wanted it to keep going, to answer my questions and continue some of the threads that had been a little too neatly knotted off.