Faeries are the magical people who reside in Etheria.
Behind the scenesEdit
The faerie nobles depicted in KQVII are a mix of Medieval/Renaissance fairies, Shakespeare's fairies and Greek gods. Although Oberon and Titania are the king and queen of fairies in early French legends, and Shakespeare's Midsummer Night Dream, in the game resemble the Greek gods Zeus and Hera.
The fairy race in KQ7 are known as "faeries" (singular: 'faerie'), though 'Faerie' is used as a plural in some instances as well. It should not be confused with the 'Fairie/Faeryfolk' (aka Woodland faeries)
In King's Quest Companion (and in Mark Hudgins concept art for KQ7 at least for Edgar) both Malicia and Edgar are described both human and faerie. According to KQ7: Authorized Guide it shows concept art (by Marc Hudgins) for KQ7 Edgar and another for Attis, which clearly lists tjhem as "Human", and the book also states: "...Rosella and her mother Valanice will encounter and interact with scores of different characters, some human, many not, and others...well, we'll let you decide." Which suggests that yes humans of some sort do live in the universe of Etheria. It further seems to confirm that the faeries must be a 'human' race.
This all suggests that either the faeries of Etheria are a human subrace, or that some of the faeries are part-human in some fashion. Keep in mind that both Oberon, Malicia's and Edgar's appearances have even more in common with humans including light flesh skin tones, and more rounded ears. Whereas other faeries such as Titania and Lolotte have green skin, and they along with Oberon appear to have smaller pointy ears. Oberon ears appear pointy at some points, but this probably has more to do with hair covering his ears (or 'camera' angles), in some scenes, he has rounded human-like ears. The Weaver of Dreams has green skin, but more rounded (albeit somewhere between both types of ears). Perhaps these are indications that some individuals are closer to human heritage than others.
Lolotte has been described as both Fairy and Faerie in King's Quest Companion. She is described as a Faerie in KQ7 (though she is described as a Fairy in KQ4). KQ7 Hintbook also points out that Lolotte was once a citizen of Etheria, which would also make her a Faerie. KQ8 manual describes both Genesta and Lolotte as members of the Faerie, and calls Genesta a 'Faerie Queen', and having a throne of Faerie, and ruling the Faeries. However, Genesta is not the same race as the Faeries of Etheria (she has wings).