Raziel mimicked Kain's earlier action, and impaled Moebius' ghost/soul on the Spirit-imbued wraith-blade. This "purified his sight", allowing a horrified Moebius to see the Elder God's true form for the first time. Raziel then devoured Moebius' soul, returning its energy to the Wheel of Fate. The Elder God described the action as "petty" and "irrelevant"; "Moebius was a good servant, but he was of no further use". However, Raziel started to understand that he was not quite as powerless as the Elder claimed. Kain had survived, and although there had never been any hope of battling the "unseen" Elder God, the Spirit Reaver had allowed Moebius to see his master for what it truly was. If Kain could see the Elder too, and was armed with the Soul Reaver, he would be able to fight it. This revelation prompted Raziel to sacrifice himself to the Reaver.
Raziel re-entered the Material Realm, using Moebius' corpse as a host. Kain ran 'Moebius' through with the Reaver before realizing his mistake, but Raziel stopped him from withdrawing the blade. As Raziel was being absorbed by the Reaver, he placed his hand on Kain's chest, allowing the Spirit-imbued wraith-blade to disperse into Kain. This healed him of the spiritual corruption he had had since birth, and revealed the Elder God to him.
Raziel had called the Elder God: "the true enemy". After a brief battle - where it was seen that the newly-created Soul Reaver was an effective weapon against the Elder's tentacles - Kain left the Spirit Forge before the enraged and threatening Elder God could bury him in its rubble. In the Vampire Citadel's council chamber, Kain paused to look across Nosgoth, towards the ruined Pillars. He reflected that "the strings of the puppets had become visible, and the hands of the prime mover exposed".
There is a good chance that the Elder God was responsible for initiating the human revolt against the Ancient Vampires, which was led by a young Moebius and Mortanius. It depends when the Elder started talking to Moebius, of course, but as their place of first meeting was the Vampire Citadel, it's likely Moebius was still under the Vampires' tutelage when it singled him out as a prospective servant.