This is an elaborate and atmospheric description of London during the late Victorian era. London was notoriously foggy—a fog which we now know to have been a result of air pollution caused by industry and the lack of controls placed on fossil fuels. This fog often makes an appearance in Gothic novels, a visual representation of the obfuscation and confusion which are key themes in Gothic literature (and in this novel in particular). Here, Stephenson personifies the London fog, stating that it "slept" above the city which seemed "drowned" beneath it. The impression this creates is of a city wreathed in fog as if in water, struggling to breathe. The city, too, is personified through the use of this language.
The lamps of the city are glimmering "like carbuncles," large stones just visible through the "muffle and smother" of the fog. Stephenson's reference to the fog as "fallen clouds" suggests that it has descended from the skies to be something other, language which cannot help but recall the idea of beings having "fallen" from heaven—something once angelic, which has now become demonic. The fog is smothering the city: we can understand this fog to be a visual representation of the city's sin and secrets, which is crushing the life out of it. The life of the town is still rolling in on roads described as "arteries," supplying critical life blood to the city's body, but the fog, not the life, creates the primary impression of this city.