The dwarfs live in the Dwarf Forests. Presumably, there are a lot of them (the Dwarf Mines, for example, have a large break room with more than 7 chairs) but so far, only the well-known "Seven Dwarfs" and Rumplestiltskin appear in the Land of Stories series. Dwarfs can live much longer than humans. Rumplestiltskin lived for over a hundred years while a human lucky enough to live that long would most likely be bound to his/her bed.
Not much is known about the history of the dwarfs, except the story of Snow White and the Seven Dwarfs.
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