"My friendly, card-carrying cupids! ...They will be roving around the school today delivering your valentines!"
-- Gilderoy Lockhart (CS13)
Dwarfs are stocky, humanoid magical creatures, about knee-high.
- On Valentine's Day 1993, Professor Lockhart employed "surly-looking" dwarfs as cupids with harps and golden wings. One ran through a crowd kicking students in the shins until he found Harry, tearing open his backpack before singing a Valentine message from a secret-admirer (CS13).
- There were "raucous dwarfs" staying at the Leaky Cauldron with Harry after he blew up Aunt Marge and left home in third year (PA4).
- Hermione mentioned "Snow White and the Seven Dwarfs" as a fairy tale she knew from the Muggle World instead of the Tales of Beedle the Bared (DH7)
- Snape used a play-on-words with the creatures "dwarf" and "giant" to describe the sizes of two of the potions bottles used in his logic puzzle protecting the Philosopher's Stone:"Third, as you see clearly, all are different size,Neither dwarf nor giant holds death in their insides..." (PS16)
- Faris “Spout-hole” Spavin, who was the longest-running Minister for Magic from 1865 to 1903, was kicked by a Centaur and nearly killed after he told an objectionable joke about ‘a centaur, a ghost and a dwarf walk into a bar’ (Pm).
From Old English "dweorh" for "very short human"
Rowling uses the standard English plural "dwarfs" as opposed to J.R.R. Tolkien's use of "Dwarves" as one of the noble races of Middle Earth.
Only twice does Rowling mention the existence of dwarfs in her world, and in neither case does she give any details about what or who they are (although they do seem to be different than just short humans). She seems to treat them the same as the dwarfs we find in fairy tales like Snow White: small humans with what may be described as rough sensibilities. They're described as "raucous" when Harry sees them in the Leaky Cauldron and "surly-looking" when being forced to play the part of cupids by Lockhart. But then again, plenty of people are raucous in bars and who wouldn't be surly if forced to play the part of a cupid? About the only thing we can gather from the descriptions is that they are short and that they are integrated into Wizarding society to some extent.
Rowling throws out references to legends, myths, and fairy tales as a way of suggesting that most of the mysteries and legends of our culture, from the Bermuda Triangle and crop circles to Bigfoot and fairy tale witches, are just manifestations of things which are part of the normal Wizarding world. The mention of dwarfs is likely one more such reference -- in this case connecting to fairy tales.