Minish

The Minish, or Picori, as they have come to be called by the Hylians, are a race of very small humanoids that descended to ancient Hyrule long ago, when the land was about to be consumed by shadow, and granted a sacred blade and a golden light to the Hylians. For these reasons, the Minish are believed to have descended from Heaven, or maybe the Sacred Realm. What is certain, is that some of the Minish chose to stay and have lived in Hyrule ever since. While their clothing and general appearance changes depending on the region they live in (typically out of fashion, not need), whether that be town, forest, or mountain, the Minish all have long, Hylian-like ears, large black eyes, feathery tails and hair of any color, although often tucked under their pointy hats.

On par with fairies, the Minish are naturally endowed with an affinity for magic and are a crafting, creative people. In fact, many of the creations that have been since passed on to other races, such as explosives, were originally created by Minish inventors. The Armos statues for one, were originally a gift by the Minish to the Wind Tribe (a people with which they shared much of their knowledge before they left the land).
The door to the Minish realm would only open once every one hundred years, and between the two worlds, lies the Elemental Sanctuary where the sacred blade gifted to the Hylians (which became the Four Sword) could draw its power. While this gate is open, the Minish of the two worlds can meet each other (carefully as any Minish left behind when the gate closes is stuck for a hundred years), as well as the pure hearted among the children of Hyrule. In fact, the first time the Minish came to Hyrule everybody was able to see them, but this is no longer the case. For this reason, children hold particularly dear the centennial festival held in Hyrule Castle when the door to the Minish Realm opens, while adults have come to consider all talks of Picori like fairytales. Because of these dwindled contacts most Minish dont speak Hylian, and Hyrules Minish speak a very different dialect than those of the Minish Realm. To get around these problems, they cultivate Jabber Nuts, a special nut that allows one to speak any language.

By consequence, the Minish can talk even to animals, but prefer dogs to cats, as many cats attack them like mice (even chicks like to peck them). They often "borrow" things like books, feathers, small pieces of wood, and the like to make (and furnish) their homes.
Minish youngsters are supposedly apprenticed to elder craftsmen to learn about magic and crafting. Each village has an elder, and at least one (within the woods south-east) has a priest that watches over the local abbey and DeepWood Shrine (a place where Minish and Hylians used to meet).
Not much is known about the Minish living in the Minish realm. The forest, mountain, and town Minish sometimes envy each other's different lifestyle, in sort of a country mouse/city mouse kind of way.

The Minish are a very, very generous people. Their whole lives seem to revolve around making others happy and to this end, they engage in a countless number of tasks. They help people with their jobs and leave all kinds of presents, like rupees or their fantastic inventions, to be found (this is why rupees and other things can often be found under bushes in Hyrule). They even cultivate a special nectar called Picolyte with various magical properties. But since no one can see them anymore, all this things have to be done in secret (lest the people they wish to make happy get scared by objects moving around). However because Minish are so good natured they sometimes just won't stop to think how their gifts may come to be abused.
The Minish seem to actually live off of the emotions they share with those they help. Which would explain why they've always been fascinated with the people of Hyrule, especially human races which the Minish hold in high esteem and whose deeds they greatly admire.
Of course not all Minish are the same, and in the case of one particular Minish, this fascination was fixated over the evil that lies within the human heart. This Minish, Vaati, wishing to spread more evil, conceived a plot to steal the Golden Light that had been given to the Hylians and use its limitless magic to become a god. He stole the "mage's cap", an artifact his elder, Ezlo, had made that could (to an extent) grant the wishes of its bearer, and used it to turn himself into a powerful sorcerer. Vaati cursed Ezlo into the form of a cap and went to Hyrule where he started causing havoc. Fortunately Ezlo run into Link and the two joined forces to stop Vaati, allowing Zelda to use the cap one last time and bring peace back to the land.