In the beginning, the Dreamer created the 8 + 1 Primordials to aid him in the construction of a world in the Dreaming Dark. To serve them in their tasks It created the Progenitor Races, numbering six. This is the story of the Proteans, the cursed servants of the Nameless and their fate after the Dawn War.
The proteans were a fluid race, originally destined to be the ambassadors between the Primordial servant races. They were capable of changing shape at will and communicating with all races by sharing thoughts.
For the rebellion of their Primordial prince they were condemned, bound to the mortal plane and stripped of all their glory. Their intelligence was taken from them, leaving them barely better than animals. Their fluidity of form was constrained; their telepathic speech was hobbled, restricted to the subconscious of their kind. In short, they had become goblins. Primitive and broken, the goblins were enslaved by all the other races and driven into the waste places of the world.
It is theorized that gnomes were descended from proteans who threw themselves on the mercy of the Eight during the Dawn War. They were stripped of their fluidity and telepathy and driven into the wilds, but retained much of their intelligence. Since gnomes went extinct at the Cataclysm, this remains simply a theory, much debated among scholars.
The story of the goblin-kindred is recounted in much more detail in Beast Races--The Goblins. They have regained some of their lost intelligence over the mortal ages but still are well short of their ancient kin.
The origin of humankind is still debated. Since the discovery by the Catalysts in the Four Towers of documents proving that humans are descended from goblin-kin, much research has taken place to pin down the exact nature of that connection. The leading theories are that either humans' ancestors were hobgoblins who wanted to break away from their tribes and cure their sterility or that they were hobgoblins modified by eladrin wizards. Either way, the veracity of the hobgoblin connection is unquestionable at this point. It is known that humans first appeared during the First Interregnum (about 3500 years before the Cataclysm), along with orcs.
Humanity came into its own only one thousand years later, when they enacted the Third Wish and started the Third Age of Quartus. They were the first to channel divine power; they quickly learned the ways of sorcery, of shamanism, and of the arcane.
Orcs and humans appeared in the historical record almost simultaneously. It is believed that orcs were hobgoblins modified by wood elf shamans in an attempt to create super-soldiers. They were intractable, however, possessed with a simmering anger that made them wholly unsuitable for disciplined warfare. The descendants of those that escaped into the wilds gathered in clans. Matriarchal (because women are less affected by the rage) and shamanistic, the orcs have only recently partially joined the ranks of civilized peoples as part of the Remnant Dynasty.
Dragonborn are the oldest race of which clear records exist of their creation. They were created in 753 BC by the Western Empire in an attempt to create more biddable super soldiers. This act of hubris was the spark that started the Fall of Empire, a civil war that lasted nearly 100 years and knocked half a continent back into a dark age that it took 600 years to recover from. The experiment was a qualified success--the dragonborn breed true and are excellent soldiers. Fewer in number than most other races, they have gathered in the Remnant Dynasty.
Created in much the same way as the dragonborn (and at about the same time), the snake-infused Serpent-kin were created by the eladrin rulers of the Fanged Kingdom to be servants and living decorations. The more humanoid ones form the underclass of the Stone Throne while the abominations with ophidian limbs or heads are classed as untouchable and are not afforded full rights of citizenship.
The more bigoted among the elves say that humans will breed with anything that moves. While that is not entirely true, there have been multiple known instances of visitors from other planes interbreeding or strongly influencing humans in a way that produces lasting changes to the progeny of those touched. Collectively, they are the plane-touched. Most of these changes are recessive and skip generations.
The genasi are only found among the elemental worshipers of Bysia. Their parents tend to be either elemental sages or those who engage in elemental magics. Their children with normal humans and half-elves have some chance to also be genasi.
Planebound deva, as well as angels who were trapped on the material plane at the Cataclysm were known to take mortal lovers and bear children. Their descendants are the aasimar. Visible traces of celestial heredity is rare and tends to skip generations. These are only found in any numbers in the Council Lands, where they are given to the Temple at birth in the vast majority of cases.
Devils fought on the side of Order in the Cataclysm War. Some were trapped; others were summoned to provide services. In some cases, they left progeny with mortals. Their descendants are the tieflings. More common than aasimar, they are still rare. Found dominantly in the Council Lands and in the Stone Throne, they are feared by the common folk. In the Council Lands, infants showing signs of fiendish heritage are often given to the Temple to serve as inquisitors. In the Stone Throne, they are considered "unclean" and so are second-class citizens.
The youngest race, halflings were born of goblin stock in the demonic aftereffects of the Fall of Empire. Somewhere between goblins and humans, they have become a solid race that has a bright future ahead of itself. They are found almost exclusively in the Council Lands, but rumors exist of primitive halfling tribes in the jungles north of the Stone Throne.