We are introduced to the town of Medallion, specifically to the area called the Bottom, which sits above the town.
"Generous funds" (Prologue.1) from an unnamed source have been offered to tear down the old businesses, along with the memories of the people who owned them, worked in them, and frequented them.
We learn a little more about the Bottom and its inhabitants through the eyes of a man traveling through on business.
A "dark woman" (Prologue.2) dances barefoot while someone plays the harmonica, and a group of people watch and laugh with her.
The traveler doesn't see the "adult pain" (Prologue.2) of the people dancing and laughing. They laugh to cope with the pain, but the traveler misses this. We don't know yet what has caused the pain, but we soon get hints that it has to do with race.
The Bottom gets its name from a joke that "white folks tell" and that "colored folks tell on themselves" (Prologue.4). Here is the origin of this "joke":
During the time of slavery, a white farmer wanted to get one of his slaves to do some hard work, so he offered him his freedom and some land if he finished the job.
The slave completed the job and the farmer immediately offered him his freedom. He didn't want to give up any of his good land, though, so he gave him a piece of land in the worst area for crops, with the worst weather and soil.
The slave had expected to get a piece of "bottom" land in the valley (where crops can actually grow), but the farmer tricked him into thinking that land on the miserable hill is bottom land, since "when God looks down, it's the bottom [...] It's the bottom of heaven" (Prologue.7).
The slave accepted the bottom land (which is really at the top), since he was now convinced that it was better than the land in the valley.
As time passed, white people continued to live in the valley and Black people in the Bottom, so the two remained separate.
At the end of this introductory section, we hear the names of two important characters: Shadrack and Sula.