"I know everyone in this city worth knowing."
Varric was born three years after his father's exile from Orzammar, into the world of the Merchants Guild: the Ancestors never spoke and Paragons were the heroes in tall tales; the number of dances a kalna lady gave to a lowborn ascendant boy were more pivotal than the reign of kings.
While Bartrand ran the businesses and drove House Tethras ever higher up the social ladder, Varric looked after the family and their retainers. His mother, Lady Ilsa, suffered terribly from the trauma of her disgrace and exile, finding solace in liquor and smoke. It fell to her younger son to try to curb the worst of her drunken rages, to keep her from becoming a matter of public scandal, and to care for her when she fell ill from her excesses.
Though he is famous throughout the Merchants Guild for his stories, Varric speaks rarely of himself or his family. Most of Kirkwall knows him; everyone has bought him a drink at least once--for the sake of his fictions rather than his family connections.
-- Codex
Determinant Points:
• Hawke is a mage, and female. Bethany died during the flight to Kirkwall.
• Isabela returned to Hawke with the relic, her approval being high enough.
• Hawke convinced Varric to spare Bartrand and had Anders heal him.
• Hawke took the shard of red lyrium and gave it to Sandal instead of Varric.
• Hawke chose mages.
• Hawke spared Anders.
(Everything else follows Bioware's 'official' canon where Alistair is king, Sten became Arishok, etc.)
About a year after the Kirkwall rebellion, Varric lent a hand to King Alistair of all people. He needed to go undercover, basically, and he also needed to infiltrate the Antivan Crows. In
Antiva. Nothing's better than a rogue when you're fighting rogues. Or two rogues: Isabela came too. There was some really weird stuff going on with Alistair's blood, some kind of importance to his bloodline, but the mystery wouldn't become clear for a while. Varric and Isabela rescued the derpy Fereldan king, and they continued on their journey.
While looking for the Crows' master, a Tevinter magister named Titus, they sneaked into a Tevinter ball. Titus was there, and a huge fight broke out. Tilani, Varric's cousin by marriage, bought them some time to escape. However, they were captured by Qunari dreadnoughts and taken into custody. Isabela was tortured and nearly brainwashed, Alistair punched the new Arishok in the face. And Varric-- Varric was generally useless. He tried, though. Eventually they came to an understanding and the Qunari were their allies again.
Now with Qunari support, they chased Titus to Seheron. Varric went solo into Titus' hideout, rescued Tilani, and then found the former King Maric attached to some kind of device that used his blood to power magic. Varric tried to fix it by destroying it, but that was a bad bad bad call and it ended up taking
everyone into the Fade. Varric and his companions fought the illusions and found Maric, and used their combined awesomeness to kill the magister. They were released from the Fade. Alistair had a couple moments of man-pain over his father, then shattered the thing and released him, granting Maric a merciful death after all that time.
Cassandra Pentaghast, sent by the Divine herself, marched into Kirkwall a little after that looking for Hawke. She found Varric and interrogated him, taking him prisoner. The mage/templar rebellion had spread all across Thedas and she wanted to know where it began. The truth was pretty ugly, and she didn't like what she heard; she even put a damn dagger through Varric's book. He was not very happy about that. But he told the truth, uh, with some elaborations...
Cassandra would eventually basically kidnap him and take him to see the Divine, but that story has yet to be told.