History:
Damascus steel was at its height of production forged near the city of Damascus in the Middle Ages. However, there are hints of production of Wootz steel, the type of metal that is used to make Damascus blades, that go back to 300 BCE. It’s legendary qualities were noted by the Crusaders.
Such qualities include an extremely sharp edge, rare hardness, and a strange water pattern upon their surface.
The process of making Damascus steel was lost in the late early 19th century. Modern reproductions have been conducted with varying techniques.
Geography:
As previously stated, the percieved region of production for Damascus Steel is the Near East. The Wootz steel, however, originated from southeast India and Sri Lanka.
Various high quality types of sword-making steels have been made throughout the world. Examples include the Toledo steel from Spain, Noric steel form Austria, Bulat steel from Russia, and Tamahagane steel from Japan.
Use in Your Games/Worlds:
Many fantasy authors have included analogous metals to Damascus steel in their works. Materials such as George R. R. Martin’s Valyrian steel, and even to some extent J.R.R Tolkien’s Mithril.
Though I would advise against calling the metal “Damascus steel” for your own worlds, the idea/trope itself has not been too overused as to be untouchable. Perhaps the long-lost Ferrousine Empire (this is a horrible name, take it if you want!) forged Ferrousith steel, a metal that could cleave through solid stone. A quest is then formed to find the ancient smithy that once smelted the steel, so that the King of (INSERT NAME HERE) can supply his troops with the best of armaments.