Dwarfs are a race of little people.
Quest for the Crown & Romancing the Stones
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 dwawf's home, stealing back the soup and discovering evidence that the dwarf was the same "thieving little pest" that was chased out of Daventry.
The Dwarf tried to get Graham to give up the 3 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.
Strangely enough, the dwarf appeared to have a grudging enough respect for Graham to appear at his wedding.
King's Quest ZZT 2
According to King's Quest ZZT 2, dwarves live mostly in caves, and are known for extreme cleanliness.