Dwarves are a race of little people.
Graham first encountered the Dwarf while searching for treasures of Daventry. He chased after Graham trying to rob him. He was found in the woods and tunnels of Cloud Mountain.
It is said that the dwarf moved to to Kolyma after being chased out of Daventry. Graham discovered him and his traps. He had a snare trap near his home baited with fool's gold coins. If an unlucky victim was caught, the dwarf would come by at his leisure and kill his victim by throwing his small dagger into their chest. Graham spring the trap and swiped the fool's gold bait.
Later, the Dwarf would cruelly steal the chicken soup Possum was bringing home to her ill grandmother. Graham sent her home and snuck into the dwarf's home, stealing back the soup and discovering evidence that the dwarf was the same "thieving little pest" that was chased out of Daventry a year before.
The Dwarf tried to get Graham to give up the three stones, by trapping him on the bridge to the Door of Destiny, and threatening his life, but Graham tricked him, tossing the priceless stones across the chasm and getting the dwarf to throw him the dagger. Freeing himself, Graham crossed the chasm and tossed the dagger into the abyss below.
The Dwarf appears at Graham's wedding, apparently at Anastasia's mercy for his treatment of her, as she has him on a literal short leash.
King's Quest ZZT 2Edit
According to King's Quest ZZT 2, dwarves live mostly in caves, and are known for extreme cleanliness.
Other dwarves had been put to work by the ogres cutting down trees at the former Centaur Village, their new Ogre Base. Others had been locked up in cells inside the main building of the base.