Like the rest of the Galilean moons, Callisto formed around four billion years ago in Jupiter's orbital plane. The moon originally was a rocky body which was eventually covered in a thick ice sheet which never melted due to its distance from Jupiter.
in 2031 ESA's Jupiter Icy Moons Explorer flew by the moon and made a more thorough examination of it, confirming that there was no liquid ice ocean beneath the surface. The first human to actually set foot on Callisto did so during the Great Solar System Tour.
When the Sol System inhabitants clamored for the terraforming of Europa, many also encouraged the terraforming of Ganymede and Callisto. In 4890 Terragen began terraforming Ganymede and Callisto, causing an explosion of jobs in the Sol System. Using lessons learned during Europa's initial terraforming stages, the moon was terraformed in a nearly identical way but with less regard for any life as none existed on the moon. Terraforming was complete in 5154.
However, due to the lack of an ocean beneath the ice, the parabolic lenses once used to help terraform Europa were moved into orbit of Callisto which were used to melt the ice all the way through to the ocean floor.
When terraforming was complete, small groups of Kya expressed interest in colonization of the moon and the first Kya settlers arrived in 5160. Callisto was already populated with aquatic life from Earth, specifically all manner of dolphins as this moon was meant to be a dolphin reservation world as well as a fishing world.
Surprisingly the Kya and dolphin population demonstrated an unusual amount of teamwork when hunting prey. Dolphins became to the Kya what wolves were to early hominids, which prompted the Europan Kya to ask for dolphins as well.
When humans built floating cities, they tried their best to fit into the new ecology and eventually succeeded in achieving a mutual understanding with the Kya and the dolphins.
Most humans live on the surface in floating cities and islands but some merefolk from Ganymede moved and built small towns underneath the lunar oceans.
Like most oceanic world, its climate is very warm and predictable as there are no land masses to block air currents.