The Paths of the Dead are part of the The Shadow Plane, a transitive plane, that allows access between the Ethereal, Astral and Material planes and facilitates access to the other main planes of existence.
When people die, their soul passes through The Plane of Shadows, where they travel through the Paths of the Dead to the Astral Plane, and join up with the River of Souls, that carries straight to Pharasma's Boneyard. However, some get 'lost' and stay in the Plane of Shadows instead.
Most 'lost Spirits' strive to complete their journey towards Pharasma's Boneyard, and seek out the Paths of the Dead and the guidance of psychopomps to help them complete their journey.
However, the Shadow Plane is infused with negative energy, and the ‘lost spirits’ who remain behind are continually exposed to this and, after a time, they change. Driven mad by the endlessly changing plane, the utter loneliness of their existence and their continual exposure to negative energy, they change - and become Undead Shadows with no memories of their former existence.
Others find their way through The Border Ethereal, where they become Incorporeal Undead (Such as Ghosts) back on the material plane.