One pitfall of worldbuilding I've seen is creating conflicts with only binary points of view. You're either on A's side or on B's side. And that's okay in some cases, though usually it lacks depth, and becomes dull quite quickly, with plotlines having nowhere to go, or often just having battles going back and forth repetitively.

Neutrality is one way to add more depth to conflicts. Here's a bit of a discussion on neutrality, taking into account real life and video game examples:

Firstly, only some kinds of neutrality add depth to conflict. Powers that simply declare neutrality then don't do anything might as well not be there. Good examples are examples that either collaborate in secret, have some sort of violent peacekeeping aspect, or allow for forum between belligerents. For example, if the Kingdom of Lorzania hasn't attacked or been attacked by another power in 500 years, yeah it's neutral, but it's not very interesting.

Switzerland during WWII

My favourite example would probably be Switzerland during WWII. Here's a good wikipedia read. Basically, Switzerland took a stance of armed neutrality during WWII, this basically meant that while they would not help alter the outcome of the war, they would violently intervene if their own country was being attacked or encroached upon.

Switzerland took on this stance for two main reasons: Primarily, they had a tradition of neutrality. Since its confederation, it has stayed out of international conflict, and keeps this almost as a tradition, but also out of genuine fear of being invaded or regime collapse. Secondly, Switzerland's population was divided down the middle between French and Germans. If they had sided with either power, half of their population would be offended.

Switzerland's army was the largest it ever was during WWII, and the majority of its population was situated near the border in case of German invasion. In addition to this, the Swiss were fervent in keeping belligerent aircraft out of their airspace. They frequently shot down Nazi and Allied aircraft violating their airspace (using aircraft purchased from Nazi Germany). Even despite vicious warnings from Germany to stop, they continued to enforce this. On several accounts, entire Swiss cities were obliterated by American bombers thinking they were over Germany.

The Americans attempted to justify this by claiming that all German people (including half of Switzerland) were 'nazi scum'.

Aside from military, the Swiss traded large amounts of gold with Nazi Germany, essentially getting filthy rich, and providing huge trade opportunity for Nazi Germany. This can arguably be seen as a violation of neutrality, or it could just be seen as national commerce regardless of warfare.

Sweden during WWII

Sweden claimed neutrality for WWII. However, they were frequently caught collaborating with Nazi Germany, including selling them weapons and machinery. Again, this could be seen as bias/collaboration, or just as national commerce.

A large reason for this neutrality was fear of being invaded by Germany, like Norway and Denmark were.

Steamwheedle Cartel in WoW

The Steamwheedle Cartel cities in World of Warcraft remain neutral in the Alliance/Horde conflict. They allow both factions into their cities, and full access to their facilities (except for factioned flightmasters). They also have a neutral auction house, to allow for alliance and horde players to trade with each other.

Their reason for neutrality is largely profit: Being on terms with both the Alliance and Horde allows for twice as much trading opportunity with both factions. It is stated in WoW lore that the Steamwheedle Cartel has become immensely rich from trading weapons and arms to both factions simultaneously. The implication of this is that they fuel war between the factions, creating more future demand for their trade, perpetuating their profit.

In game, if a player attacks an opposing player in any Steamwheedle city, the attacker is instantly ambushed by guards who use deadly force to stop the conflict. If a player attacks out of self defense, the guards leave him alone. However, players do not lose reputation with the Steamwheedle Cartel for causing such commotions.

Zeldharu, in my own conworld

Zeldharu is a federal republic in my own conworld. The country claims to be neutral maritime peacekeepers, though their ships are frequently found harassing and looting merchant, commercial, or even warships; they bring up concerns of piracy. Zeldharian ships have never been full out sunk or shot at for these 'attacks', though frequently the country takes crap during international discussion. (The country does battle genuine maritime piracy more than most other countries)

Many theorise that Zeldharu collaborates with and supplies pirates to provide justification to their maritime violence, though these claims are generally not too accepted.

The country cites 'genuine peacekeeping desires' as their motives, though it's common knowledge that Zeldharu makes significant profit from their escapades, even when reparations are demanded from other powers.

Historically, they've used the same excuse for imperialism; wiping out and colonising entire nations under the claim that such powers were being aggressive to small countries and states.

These are four examples of how neutrality can add depth to conflict. If someone wants to add another entry, I'll edit it in.

This can be summarised into the following main points:

• What kind of neutrality is it? Armed neutrality? Collaborator neutrality? Peacekeeping neutrality? disguised imperialism?

• Why do they interfere with your conflict? Profit? Fear? Genuine moral concerns?

• Why are they neutral in the first place? Concern over regime collapse/being taken over? Tradition? Profit?

• How violent are they? Are they all bark and no bite? Will they topple over if their borders are pressured? Will they violently intervene in conflict (and for what reasons)? Will they defend their country to the last man? Will they seek to create a large buffer zone?

• Do they benefit from external conflict? Do they make profit off of selling arms/fueling more war? Are there conspiracies of them collaborating? Are the belligerents merely puppet states of this neutral regime used to achieve this regimes own end goals?

Also look at the geography of your world. See what natural features may influence the answers to the above questions. If the neutral state is in between opposing belligerents, will they be more inclined to armed neutrality like Switzerland?

Are they within easy access to the belligerents? If so, they'll likely be trading with one or more.

I hope this helps fuel creativity!