The Dwarves of the fictional Middle-earth universe are beings of short stature, often friendly with Hobbits although long suspicious of Elves. They are typically smiths and stoneworkers by profession, unrivaled in some of their arts even by the Elves.
Unlike Elves and Men, the Dwarves are not counted among the Children of Ilúvatar. They were created by Aulë the Smith. They were kept asleep until the creation of the Elves. Aulë created the Seven Fathers of the Dwarves, from whom all other Dwarves are descended. Aulë later repented, and fessed up to Ilúvatar. Ilúvatar granted the Dwarves life, and therefore they are known as the Adopted Children of Ilúvatar.
Most Dwarves mentioned in Tolkien's works are of the clan founded by Durin, called the Longbeards. (A notable exception are the inhabitants of the dwarf-cities of Nogrod and Belegost in the Blue Mountains, spoken of in The Silmarillion).
They mined and worked metals throughout the mountains of Middle-earth. In many ways, they were in between the Elves and Men. They were not immortal, but lived to two hundred and fifty years or more. They were generally less corruptible than Men, but committed their share of rash and greedy acts. (Among these are the slaying of Thingol and the dispute over the Arkenstone.) The Dwarvish language, called Khuzdul'' and created by Aulë, sounds much like Hebrew, and one may draw the similarities between the Dwarves and the Jews even farther.
Thorin brings twelve Dwarves to Bag End to recruit Bilbo for their treasure hunt in The Hobbit.
Gimli joins the Fellowship of the Ring and befriends Legolas in The Lord of the Rings.
