In the pixie description on the compendium:
Altitude Limit: You fall at the end of your turn if you are using your racial fly speed and are more than 1 square above the ground (see the rules for flying and falling in the Rules Compendium).
So can a pixie choose to go two or more squares above the ground?
Here are the relevant rules from the compendium:
A creature that has a fly speed can fly a number of squares up to that speed as a move action. If it is stunned or knocked prone while flying, it falls. See also “Flying” and "Hover".
Some creatures have the innate ability to fly, whereas others gain the ability through powers, magic items, and the like. The rules for flight in the DUNGEONS & DRAGONS game stress abstraction and simplicity over simulation. In real life, a flying creature’s ability to turn, the speed it must maintain to stay aloft, and other factors put a strict limit on flight. In the game, flying creatures face far fewer limitations.
Flight follows the basic movement rules, with the following clarifications.
Fly Speed: To fly, a creature takes the walk, run, or charge action but uses its fly speed in place of its walking speed. A creature that has a fly speed can also shift and take other move actions, as appropriate, while flying.
Moving Up and Down: While flying, a creature can move straight up, straight down, or diagonally up or down. There is no additional cost for moving up or down.
Falling Prone: If a creature falls prone while it is flying, it falls. This means a flying creature falls when it becomes unconscious or suffers any other effect that knocks it prone. The creature isn’t actually prone until it lands and takes falling damage.
Remaining in the Air: A flying creature does not need to take any particular action to remain aloft; the creature is assumed to be flying as it fights, moves, and takes other actions. However, a flying creature falls the instant it is stunned, unless it can hover.
Landing: If a creature flies to a surface it can hold onto or rest on, the creature can land safely.
Terrain: Terrain on the ground does not affect a flying creature if the terrain isn’t tall enough to reach it. Because of this rule, flying creatures can easily bypass typical difficult terrain, such as a patch of ice on the ground. Aerial terrain can affect flying creatures.
- Falling while Flying: If a creature falls while it is flying, it descends the full distance of the fall but is likely to take less damage than a creature that can’t fly. Subtract the creature’s fly speed (in feet) from the distance of the fall, then figure out falling damage. If the difference is 0 or less, the creature lands without taking damage from the fall. For example, if a red dragon falls when it is 40 feet in the air, subtract its fly speed of 8 (8 squares = 40 feet) from its altitude. The difference is 0, so the dragon lands safely and is not prone.
If a creature is flying when it starts a high-altitude fall, it has one chance to halt the fall by making a DC 30 Athletics check as an immediate reaction, with a bonus to the check equal to the creature’s fly speed. On a success, the creature falls 100 feet and then stops falling. On a failure, the creature falls as normal.
- High-Altitude Falls: Some encounters take place very high above the ground. In such an encounter, it is possible for a creature to spend more than one round falling to the ground. As a rule of thumb, a creature falls up to 500 feet during its first turn of falling. If it is still falling at the start of its turn, it can take actions on that turn as normal, then falls up to 500 feet at the end of the turn. If none of those actions expressly halts a fall, the creature falls up to 500 feet at the end of the turn. This sequence continues until the creature lands.