Throughout the world there are common mythological creatures - dragons, giants, little people, godhead (and lesser beings), nature spirits for instance. I find these commonalities endlessly fascinating and a riddle for logic - both rational and lateral. If a story is rare or from a particular area, one can see it as a customary peculiarity or a statistical anomaly. However, when there is a recurring idea throughout the world's cultures, one has to wonder if there is some purpose or even grain of truth behind it. Especially in societies where life is hard and hand-to-mouth and yet the people expend energy in dance, ritual and story telling to honour and maintain seemingly useless beliefs. Why? For generation after generation they pass down this knowledge even at the cost of their lives. Why? Unless there is some benefit, something behind it that expending the energy makes it worth it. For example, the idea of a multidimensional universe where spirit resides is pretty widespread.
Which brings me down to the little matter in a world that "there are more things between heaven and earth then man has ever dreamed". This is from European myths, but there are stories from every part of the world about "little people", good, bad, and ugly. Yes, faeries. The wee folk, the one that people see under the influence of Absinthe, magic mushrooms or badly brewed bootlegged Rum in days gone by.
In Europe nature spirits and the little people were in pagan times accepted as a part of life (such as the druidic priests knocking on oak trees to speak to the tree spirits, or why you knock on wood), as with many indigenous peoples. Then, with the advent of the Church, many of the beliefs and customs were vilified (such as saying faeries are amoral or mermaids have no soul), in an attempt to undercut the old "religions". I'm not saying Judaic/Christian spirituality is baseless or has remained intolerant and unloving, but the Establishment of the day in the form of organised religion (the Church) were doing damage to the peoples knowledge in the name of Power. However, you can tell a lot about a culture by their reaction to their encounters to their "little people". And ALL peoples have had encounters. Denial comes from a society that lies. Open acknowledgement is an innocent people. Seeing them as bad is a suspicious, closed society, seeing them as good is loving society, and seeing them as both is a realistic society that have gathered knowledge over time.
Anyway, in Europe they are called (in the UK), fairies and pixies. Here is one idea. The olde Celts put the the sound "ee" on the end of a lot of words. If the original people of the islands were visited occasionally by fair-haired Saxons and Nordic travellers could the stories around the little people began with the "fair-ees"? And their mysterious tiny hill dwelling neighbours the Picts? "Pix-ees"? The same goes for brownies (brown-ees) and kelpies (kelp-ees). I don't know about elves or goblins (maybe in a slander over resources, "gobbling") or the others, but the name for the little fairies and pixies makes sense to me.
Another hypothesis is that if a rather large Irishman from the stone age learns how to make a boat from a "fairee", and winds up in Wales (little dark haired people), has an encounter (maybe a misunderstanding) and returns back to Ireland, both people would have an unusual story to tell. If there was a fight, people being people, the story would have been exaggerated by both. In the tale of the "battle" (scuffle), the little people would have gotten smaller and smaller, and the giant would have gotten bigger and bigger.
It is interesting how often peoples all over the world say the little people live underground (dwarves mining for metals when blacksmithing was a nearly magical thing to common folk, or ant people for the Hopi Indians, or yowies and/or min mins for Australian aboriginals, for example) or on a hidden island that has some kind of "magical" doorway. The "magical" door sounds to me like a point of dimensional shift, which quantum science is starting to realise is actually a possibility, no, a probability.
A more "out-there" idea embraces "modern" alternative schools of thought. Apparently, the olde temples and places of import in "science" (stone age astronomy) and spirituality (Stonehenge etc) are built on the Earth's meridian points along "ley lines". Let's say an American Indian tribe is doing a ritual Sundance on their meridian point in the Americas. They have been dancing for hours, and are in a total state of trance. They slip through a dimensional doorway for a while. Projected on the other side of the world, on a sister meridian, they appear as a circle of tiny people dancing. Their headdresses look like wings in their diminutive size. A passing farmer, high on dodgy brew sees this and the story of yet another odd encounter is born.
If you look at the pictures of archetypal little people, they look a lot like classical "greys", the large eyed, large headed, small framed aliens in the group consciousness of popular culture. Could the "wee folk" have been the friendly visitors from out of space that is gently portrayed in "E.T."? Could the "gold" and "silver" the fairies, dwarves, leprechauns seem to bear and love be a metaphor for something greater? Wings in many artworks and mythological depictions (gods, angels, faeries, witches) throughout all cultures are a indication of a flight of the soul mind.
Anyway, this purely speculative, with little opportunity to "prove" in any scientific field in science's current basic form. However, life would be very boring without some mystery to muse upon and spectres to speculate about just beyond an ordinary grasp.
You can look up stories about "little people" in mythologies from all around the world on the web (start with fairies on wikipedia).