It is a suitable beginning for this project to start with an origin myth. The Icelandic term that is the linguistic equivalent to the English word "elf" is "álfur", but it is considered somewhat pejorative, which is why we prefer to call them "huldufólk", meaning "the hidden people". There are two stories about their origins in my selection of tales from the Jón Árnason folk tale collection. Here is one:
Once upon a time God came to visit Adam and Eve. They received him joyfully and showed him their house and their possessions, and also their children. God asked Eve if she had any more children than the ones she had shown him, but Eve told him that no, these were all her children. But the truth was that Eve had not had time to give some of the children a wash before God arrived, and so had hidden the unwashed ones out of view. But of course the all-knowing, all-seeing God knew this. So he said to Eve: "That which you have tried to hide from me shall be hidden from man also".
And so Eve's hidden children became invisible to the human eye and took up residence in hills and cliffs, hillocks and rocks. Their descendents are the hidden people, the elves, but the human race is descended from those children of Eve whom she showed to God.
Humans can never see their hidden cousins unless the elves allow themselves to be seen, for they were given the ability to see humans and be seen by them at will.
Copyright notice: The wording used to tell this folk-tale is under copyright. The story itself is not copyrighted. If you want to re-tell it, for a collection of folk-tales, incorporate it into fiction, use it in a school essay or any kind of publication, please tell it in your own words or give the proper attribution if you choose to use the wording unchanged.