In Arcane, Piltover is a wealthy, prosperous city, governed by a Council of powerful merchant clans and built on trade, science, and technology. Zaun is the undercity beneath it — originally part of the same city, but separated after an early industrial disaster polluted the lower levels and left them a toxic, lawless underworld.
Zaun has no political representation on Piltover's Council, yet is economically dependent on it and policed by its enforcers. Piltover, in turn, profits from the undercity's cheap labour and manufacturing.
[In-universe]