Also known as "earth dwellers" gnomes are earth elementals that are considered to be descendants of Dwarvish Fae Folk. As elementals they are made entirely of energy and often appear invisible except to those who have the 'sight' (probably for the best considering it would probably freak the general population out if they could see gnomes and had to believe magic existed haha). Their relation to dwarves has largely been based upon their dwarvish appearance and, the legend of the garden gnome which says that gnomes appear in gardens after a ray of sunshine has turned a dwarf to stone.
Legend also states that gnomes are the guardians of treasures deep within the belly of the earth. In my opinion this would also support the case that gnomes are of dwarvish descent considering the dwarf's relation to hidden underground treasure. Gnomes can be found deep within forests, as they traditionally make their homes in the roots of trees however, they will wander out and about from time to time.
Though they are generally believed to be reluctant to help humans, they are not against helping out the kind, honest humans they like. Gnomes are said to assist in prosperity spells as well as in the strengthening of confidence and endurance. On the other hand gnomes can also create melancholy and gloom if need be. Gnomes as spirits of the earth also protect wild animals and humans (at least in respect to their health).
As guardians of the earth's hidden treasures gnomes are appreciative of shiny material things such as quart crystals and honestly who doesn't like a thank you gift once in a while!