Where does the modern D&D concept of a dwarf come from? I've noticed it's fairly far from the old Germanic concept of a dwarf. Where did Gary Gygax and company get the idea for the current long-bearded, honorable, armored, axe-wielding creature we know (and love) today?
Tolkien's Hobbit, Lord of the Rings, and the Silmarillion lead directly to Perren and Gygax's minis-battles fantasy supplement, Dwarves in Chainmail (see Chainmail 3rd Ed, p. 28, and the later designer's notes article). Also, Gygax and Arneson made much use of this in the games which would later become D&D.
Tolkien claimed inspiration from the Norse and Anglo-Saxon dwarves, but admitted to changing them substantially. Terry Brooks (Shanarra Series), Poul Anderson, and several other authors specifically draw from Tolkien's presentation of the race of Dwarves.
A number of games specifically move away from Tolkien; Some make them short Norse, some make them otherwise different (like the Mostal of Glorantha, or the Shtuntee of Orkworld), and later D&D dwarves are drifted from Tolkien's model as well.
Most games follow the D&D pseudo-Tolkienian model. Most modern authors do so as well; Tolkien has been noted as stating he intended to create a saga for the English Speaking World; by most accounts, he's succeeded.
His vision of Elves, Dwarves, Hobbits/Halflings, Trolls, Orcs, and Goblins have become the English cultural norm; only Elfquest has given much challenge to this superiority, tho' the medieval English and French fairy elf views still have some traction, especially since they have much place in another still widely held cultural myth: King Arthur.
To give something similar to Aramis' excellent answer but with a different emphasis: the word "dwarf" etymologically related to the German word "Zwerg", who are small, magical people who live on mountains or underground, like their privacy, and may do good or harmful things to humans in their rare contact.
Gygax read widely, not just Howard & Leiber, but also fairy tales, &c. so his concept of dwarf is a bringing together of many strands that came from this source. It would be great if someone could document all of the characteristics and how they arose and were inherited by various incarnations of the dwarf archetype.
As Aramis pointed out the basis for the English speaking worlds common perception of dwarves is Tolkiens mythology which is in turn based on old Norse mythology.
A fun fact which, might also serve to demonstrate this point: Tolkien borrowed many of his characters' names, especially the dwarf names, from old Norse writing.
Prominent here, from the Poetic Edda/Völuspá II, the seeress' prophecy, two verses:
- Then went reigns all
to their smoking seats,
the high-holy gods
Who should the Dwarfs,
the kings' men create,
from oceans blood
and the blue calves.
- Measure is the Dwarfs
in Dvalin's flock
the men of lions,
and Lofars count.
There they went
from temples rocks,
to Aurvanga shoots,
and earth dwellings.
There are many more verses, listing dozens of dwarf names -- many of which should be quite familiar to fans of Tolkiens writings.
Poul Anderson's Three hearts and Three Lions (1961) has a very modern sort of dwarf in it, and it was definitely an influence on early D&D.