A game from Bullfrog, released in 1994. One of those Molyneux games.
The story goes like this: A world was created with a lot of mana, the magic power. People discovered why mana was useful and began collecting it. That turned into rivalry. (People are greedy.) And then... a magician tried to restore the order in this war (known as Wizard War), but failed.
Now, this magician's apprentice does the right thing by restoring equilibrium in every world. This is done by annihilating all weird creatures and collecting the mana contained in them.
The player - the said apprentice, of course - flies around with a flying carpet in a near-eastern-style world, and casts spells. One of the most important ones is the Castle spell that creates a castle to which the mana is then collected by automated hot air balloons (the castle can then be expanded if there's too much mana to hold it).
The game was technically very cool, looked great, and had a lot of fresh ideas.
The sequel, Magic Carpet 2, was equally great with even more magical insanity.
"Be wary, fly well and cast evil forever from this world."