The fey are typified as long-lived, highly intelligent, magically proficient humanoids, often more slender and sometimes taller or shorter than mundane men. While it may be simply Fey propaganda, they are usually more intelligent, graceful and beautiful than mundane man, often having much higher technology (or magic) than is available to mankind. They can be an alternate evolutionary track that evolved in a high magic environment, dwellers in or from an alternate plane, decadent survivors of an earlier race, or embodiments of nature or sprits of the air (or some such).
They tend to be aggressively secretive, dwelling in magically hidden refuges from the grubby, human infested world. Their homelands are very dangerous to the uninvited, combining cunning illusions, traps, and good old arrows to the liver from ambush. Those few that do venture out into the world are often aloof, and always have their own agendas and goals, which will dominate their behaviors. Humans and other such are either treated as annoying pests, barely sentient savages or, at best, cute, but none to bright pets.
Being extremely long lived, they are certainly possessed of far more skills and spells than a typical human could ever learn. Despite these advantages, they suffer from some weaknesses: they cannot break a promise, harm their guests or enter a house uninvited, nor can they abide priests or holy artifacts; taking a -3 on all rolls while within sight of a holy artifact, and 1 pt of damage each round they are touching either.
They cannot be magically healed by priests, and can never be resurrected. Finally, they are traditionally unable to tolerate iron and take 1d6 from any contact with iron, and double damage from any iron weapon. Alloys of iron (such as steel) may or may not reduce or retard this effect at the game master’s discretion.
For a less elf-welfy nicey-nice earth-spirity view of the Fey, add the following ability to either the Lords of the Fey, or to all Fey (for maximum effect). Fey are natural, but limited shapeshifters. They can take the shape manners and voice of any creature they know of or imagine, gaining all of its basic physical abilities within certain specific limits. They may be as small as a (human) thumb, or as large as three times normal human size. Their mass and strength remain the same regardless, and as a result most forms tend to human size or smaller. The Fey gains any ability or skill that is based on physical structure, subject to the physics or lack therof in the campaign world. Thus, wings let you fly regardless of mass (in most fantastic realms), and stingers produce poison, but invisibility is not possible.
Additionally, while any type of form may be chosen, they may never take the form a specific creature. Thus, the form of a huge tiger might be chosen, but not the specific one eyed tiger-king of the local jungle; likewise an inhumanly beautiful human or humanoid may be taken, but not the specific form of the king, or an adventurer. Essentially, their inherent self-centered ego and lack of empathy makes it impossible for them to take the form of any recognizable individual other than themsleves.
Finally, while they are able to switch forms as humans do clothing, they definitely have a favored form, which is highly individualistic, and in many ways, intended to distinguish them from other Fey. Note that fey forms are treated as a unique possession of a particular Fey –much as with Coats or Arms, or less majestically, clown faces. The prohibition on imitating another individual applies to the favored form of another Fey.
If the shapeshifting option is used, players should not have access to it; this may or may not rule out player character Fey, or it may limit it to very specific areas or situations if the GM so desires . An example would be only to allow Fey shapeshifting only in their home forest (or other very local home area), or perhaps requiring players to renounce it so as to be able to wander the world and not be bound to their home.