There are three subjects within the sphere of European history with which every educated High Medieval European reader could be expected to be familiar, for they serve to provide much of the content for a wealth of literature in the period: Classical Antiquity, Arthur's Britain, and Charlemagne's France. In no case was the expected knowledge terribly accurate (in fact it's probable one of the the three matters is a complete fabrication), but it's likely the stories were widely taken as, if not strictly factual, at least rooted in true history. And, tellingly, many of the later literary works dealing with these subjects assume the reader's familiarity with the material. The skill of the Medieval author lies in presenting a story well, with novel details and artful presentation, even more than in telling tales wholly unfamiliar to the audience.
These three subjects were recognized as important literary genres by the poet Jean Bodel (1165-1210), but continue to be prominent in literature up through the Early Modern Period. For example, there is an abundance of material on each subject in the Romancero Viejo tradition, though an even greater selection deals with the history of Spain. In each case, themes prevalent in the literature of the time and space in which the work is produced are introduced into the depiction of the past; much as, today, Robin Hood stories remain popular but the newest presentations of the material have come to be very different in character from the oldest, early modern Spanish presentations of Carolingian material will fairly consistently be spun in such a way as to attach glory to Spanish identity while also often showing a certain battle-weariness, whereas a Middle English retelling of a Classical myth will introduce anachronistic themes of knighthood, chivalry, and courtly love. These stories retained their prominence not because their themes were timeless and universal, but, on the contrary, because they could adapt to present themes that were especially weighty in the minds of their tellers. It takes a talented writer indeed to tell an old story known to the entire audience, while giving it a renewed significance that grants it an impact beyond any it may have had for them previously.
Jean Bodel's Old French terms for these three prominent historical genres remain in use today, albeit in modern translations of the phrases. He termed them the "Matter of France," dealing with the early Carolingian period, the "Matter of Britain," dealing with Arthurian legendry, and the "Matter of Rome," dealing with Classical myth and history; this last has a named subgenre, the "Matter of Troy," which entails retellings of stories about the Trojan War.
For Bodel, surviving Roman writings formed the bulk of the Matter of Rome, while other more current texts were the core of the other two matters. The French epic chanson de geste tradition includes a number of pieces on the Matter of France, most notably the Chanson de Roland ("Song of Roland"), which is the archetypal telling of one of the most famous stories of the vassals of Charlemagne. Bodel would also have likely been familiar with the Arthurian works of Chretien de Troyes. Since Chretien wrote during Bodel's lifetime, and the anonymous author of the Roland epic is thought to predate him by the slimmest of margins, noting the contents of these works as high literary genres seems prescient; Jean Bodel could hardly have known they would indeed retain a position of prominence at least equal to that of the Roman material.
More subtly, however, Jean Bodel's classification is a bold statement about then-current literature. At a time when the Arthurian genre was only beginning to take off and the greatest expression of the Carolingian legends was still fresh, terming them the "Matter of Britain" and the "Matter of France" and then placing these alongside the "Matter of Rome" is a way of stating that they are as worthy of attention as the illustrious works of an earlier age. Further, by identifying French literature dealing with Roman material as part of the same cycle as the Roman texts, Bodel further cements the notion that, at least in the sphere of literature, the renaissance of his own day was a true revival of the glory of Rome. The anonymous author of the Chanson de Roland, then, was being presented as a Virgil of the new millennium, and the more freshly innovative Chretien was being placed in their illustrious company. It's an opinion that stands the test of time; nine centuries on, we still regard the Chanson de Roland as one of the core examples of High Medieval verse, and if the writings of Chretien de Troyes are no longer the quintessential interpretation of Arthurian subject matter, it is only because the popularity of the genre he helped spark has yet to fade entirely.
Even by the late 12th century, Classical material was beginning to be reworked into the anachronistic form we recognize as the historical Matter of Rome today. The Roman d'Eneas, written by an unknown contemporary of Jean Bodel, is a prime example; it retells the story of the Aeneid, but focuses on the contrast between Eneas' lustful relationship Dido and his pure courtly love for Lavine, Princess of Italy. Later examples will feature the Roman knights participating in tourneys of a High Medieval sort, or bring Greek myth into the realm of English folklore as when Sir Orfeo (Orpheus) goes to rescue his wife Heurodis (Eurydice) from the King of Faerie. The Matter of Rome in its medieval expression, it seems, brings the past to life for a medieval audience by making it familiar, and so draws it into the folklore of its authors' own era.
The distorted Carolingian history presented in the Matter of France is similar. It deals with Charlemagne and his vassals, though it seems the literary Charlemagne may be a conflation of the historical one with his grandfather, Charles Martel, and perhaps with Pippin the Short who ruled between them. For instance, one story tells of a plot to betray Charlemagne by two bandits whose names have been identified as those of rebellious lords under Martel, while one Spanish romance tells (at considerable length) the exploits of one Count Gayferos, almost certainly a mythologization of Waifer, Duke of Aquitaine; Gayferos is a loyal vassal of Charlemagne, though the historical Waifer died in the same year as the historical Charlemagne ascended to the throne. Again, the historical figures are cast into stories which present the ideals of their authors rather than of the Carolingian period some four centuries prior. The illustrious Roland, Count of the Breton Marches, is regarded as a paragon of knightly virtue, and his adventures serve to illustrate to us precisely what that meant; the answer is one which belongs to the High Medieval cultural context, however, and sheds no light at all on the realities of eighth- or ninth-century Frankish court culture. Perhaps the subtlest demonstration of this fact I know of is a song popular today among medieval reenactors which tells the story of Roland's death. In this version, written by the talented Jonna Bernstein, Roland heeds the advice of his wiser friend Oliver and sounds his horn repeatedly to call back Charlemagne, but the deceiver Ganelon prevents anyone from going to his aid. It's a story of a great knight who gives courage and hope to his followers while doing his best to summon reinforcements, thinking ever of the needs of those he commands; in this, it contrasts with the medieval legend, in which it is more praiseworthy for Roland to refuse to summon reinforcements and instead make a glorious last stand.
The Matter of Britain, of course, is an invention which belongs purely to medieval legend. Again, however, its growth and change over time can be seen to place each story more within its own time than in any true past. This is especially apparent as the Arthurian stories have continued to be familiar and popular for nearly a thousand years; the themes projected onto the always-long-past King Arthur and his Round Table are reliably "modern" for the time of the telling. Thus, Malory's familiar Le Morte D'Arthur emphasizes a Late Medieval notion of chivalry, following such poetic presentations as the Alliterative Morte Arthur, which includes such memorable moments as Arthur being given a vision of the nine greatest exemplars of chivalry who have ever lived (some of whom are, explicitly, heroes yet to come); Arthur finds himself included among them, and is inspired to continue to pursue the virtues that make him so. More recently, Tennyson's literary Idylls of the King tell us a great deal about how the 19th-century Romantic movement saw its most idealized past. Arthurian legend reacts to the World Wars in TH White's The Once and Future King (which may be the most definitive version of the stories for many modern audiences), and is placed solidly in the 1970s by Bradley's Mists of Avalon. In all cases, a major theme is the fall of Camelot and what has been lost thereby (hence, in many cases, early English sources being titled a variant of "The Death of Arthur"), but since at least the late Middle Ages it seems clear that the lost Camelot is known to have never been more than an ideal. Arthur is announced by his tombstone to be the future king as well as the past one, an implied exhortation to build in reality a Camelot that had only ever been found in legend - but what, precisely, it would mean to build a present-day Camelot is a question that varies with the values of the time.
The persistence of the Three Matters, then, marks them at once as subjects that are enduring and, paradoxically, as ones wholly tied to their own eras. They each move forward by adapting, allowing each century's myth-makers to take familiar stories and spin them to emphasize new ideals. Any expression of these cycles in folklore or literature, therefore, is part of a lengthy continuum of tradition, but each reflects a certain point in time within that tradition and draws great heroes of legend into a celebration of the values of their own day.