The dwarves were not part of Iluvatar's plan for the world. Unlike elves and men, the Children of Iluvatar, dwarves were crafted by the Vala Aule, who was impatient to have someone to teach his craft and knowledge to. But he did not have the power to give them life. When he repented his foolishness, lluvatar granted him his wish, despite the fact that dwarves were not in his original concept. Dwarves are shorter than elves and humans, but hardy and strong. They have large, profuse beards that often reach to their waists. They live about 250 years on average. They have a great love of earth, minerals, and precious stones and are reknowned for their craftsmanship. The dwarves have made their homes deep in the mountains, where they mine precious metals and gems. Notable dwarf-homes today are in Ered Luin, The Iron Hills, and Erebor. Long ago they had another home: the great delvings under the Misty Mountains called Khazad-dum by them. But they awakened something deep under the earth by their mining, and were driven out. Now it is called Moria, the black chasm. They still hope to reclaim it someday, though. Dwarves are quite secretive about the language they speak, though its name is known as Khuzdul. They take names in the languages of men and keep their real names secret from non-dwarves.
The Dwarves and the Elves
The dwarves were often allies of the elves in the wars with Morgoth. Since he wished to subjugate all the rest of Middle Earth, it was easy for the peoples not under his power to find common cause. The elves and dwarves fought together in many great battles against the orcs and trolls, balrogs and dragons in the service of Morgoth. They also worked together to build great cities and fortresses, and arms and armor.
Also in the days of the wars against Morgoth, some dwarves fashioned, upon the request of King Thingol of the elves, a necklace with the Silmaril that Beren had retrieved from Morgoth. When it was finished, the dwarves were awed at the beauty of their work, and withheld it when Thingol tried to get it. When he argued with them, they killed him. Around this incident there has been much animosity between the elves and the dwarves for millenia, and it can be only hoped that these differences may be reconciled.
The Peoples of Middle Earth