According to HISTORY OF GALLOWMERE - Volume 1, Zarok had fallen out of favour with King Peregrin for conducting outlandish experiments on the bodies of the dead. It was said that deep within Peregrin Castle the dead were restless.
King Peregrin banished Zarok from the Castle. All of Zarok's living dead were routed out and destroyed. Zarok being an unforgiving soul went into hiding and vowed to wreak his revenge on the King.
Some time later, Zarok returned from hiding and began waging a war on Gallowmere. The war ended with the Battle of Gallowmere where Zarok's armies were defeated.
In reality, Zarok was never banished at all as he had the King under an enchantment right up until the day of the Battle of Gallowmere where the King finally learnt about Zarok's betrayal from Sir Dan.