Dwarves had different relations compared to the Valar and the Elves, especially Aulë.
Making and Awakening of the Dwarves
The Dwarves were made by Aulë, who kept this work hidden from the Valar, against the will of Eru. When asked, Aulë said he didn’t desire lordship. He would later repent.
“I desired things other than I am, to love and teach them, so that they too might perceive the beauty of Eä…and in my impatience I have fallen into folly.” (Silmarillion, “Of Aulë and Yavanna”)
Aulë wept smiting the Dwarves, though Ilúvatar would later decide the Dwarves to remain – though they would awaken after the Elves.
Aulë took the Seven Fathers of the Dwarves, and laid them to rest before returning them to Valinor. The Dwarves would aid Aulë in the remaking of Arda and the Last Battle.
Durin
Durin was the Eldest of the Seven Fathers of their race. He was also the ancestor of all the kings of the Longbeards. He was known as Durin the Deathless.
While Durin the Deathless had died before the passing of the Elder Days, his line had continued growing. He was held by the Dwarves to be the Deathless.
Durin was again the King in the Third Age as the sixth of that name. However, Sauron’s power had increased by then, with evil things stirring.
Khazad-Dum
The powers of Khazad-Dum had increased after the end of the First Age and was enriched by many people during the ruin of Nogrod and Belegost in the Blue Mountains after the breaking of Thangorodrim.
The power of Moria had endured during the Dark Years and the dominion of Sauron. Eregion was destroyed and the Mines of Moria was shut.
Durin was later slain by a Balrog of Morgoth, as the Dwarves delved deep seeking beneath Barazinbar for mithril, the metal beyond price that was becoming yearly ever harder to win.” (LOTR, App. A) The powers of Moria had passed and the people were destroyed or fled far away.
Most of those whom escaped went to the North in Erebor, the Lonely Mountain.
Erebor
In Erebor, Thrain I became the King under the Mountain and found the great jewel called the Arkenstone – Heart of the Mountain.
His son Thorin I, however, was removed and went north into the Grey Mountains. At the time, most of Durin’s Folk were just gathering.
After Dain I was slain, along with Frór his second son, most of Durin’s Folk had abandoned the Grey Mountains. Thror bought back the Arkenstone, and he and his kin had prospered and became rich. They also had the friendship of Men who had lived amongst them.
The Dwarves were soon known to have made weapons and armor of great worth, and the Northmen who lived between Celduin (River Running) and Carmen (Redwater) became strong and were able to drive back all enemies from the East.
As a result there was a lot of feasting in song in the Dwarves of Erebor. Many of Thrór’s kin escaped shortly afterwards. Soon after there would be the meeting between Gandalf and Thorin.
War of the Dwarves and Orcs
Thrór would become old, poor and desperate, and give the last of the Seven Rings to his son Thrain.
After the Nár brought back to him, the War of the Dwarves and Orcs had started. Thrain would send messengers and Durin’s Folk would gather all their hosts, and “they were joined by great forces sent from the Houses of other Fathers, for this dishonor to the Eldest of their race filled them with wrath.” (LOTR, App. A)
At first fortune was against the Dwarves, but not so much with the Orcs, as they had outnumbered their enemies. This began the Battle of Azanulbizar. Thráin and Thorin were wounded, while his son Frerin and his kinsman Fundin were slain.
Azog, the father of Bolg, came forth, and he was a great orc with a huge iron-clad head, and yet agile and strong. He showed up with many that were like him.
However, Náin was blind with rage, and made a great stroke with all that remained of his strength. This was still not enough for Azog, who would produce a blow so heavy on Náin’s neck and he fell.
Náin’s son Dáin, however, was able to catch and slay Azog. He would later fall in the War of the Ring. The Dwarves that were left gathered in Azanulbizar.
After the war, they would disperse, and Thráin and Thorin would go back to Dunland.
The Seven Rings
The Dwarves of Durin’s Folk were believed to be the first of the Seven Rings that were forged by the Dwarves. It was given to Durin III by the Elven-smiths rather than from Sauron himself.
However, the possessors did not speak of it, and the rings were seldom surrendered until near death.
It was commonly believed among Durin’s Folk that it was worn by Thrór, however it was not true. It was not found on the body of Azog.
The Dwarves believed the Sauron founded the Rings. The only power they had from the Rings was a greed of gold and precious things. If they had lacked them – everything seemed profitless, leaving them in wrath and vengeance.
The Ring was partly to blame for Thrain’s restlessness and discontentment, and his lust of gold was still strong. When he could no longer bear it, he resolved to go back to Erebor where his thoughts turned.
Thrain had been taken alive after and brought to the pits of Dol Guldur. He was tormented there and the Ring was taken from him before he died.
Thorin Oakenshield had became the Heir of Durin, and seemed content to remain in Erebor. He had gained wealth and his people were increased by many of the wandering Folk of Durin who had heard of his dwelling.
Dwarf-Women
Dís was the only dwarf-woman in the histories, and was the daughter of Thrain II.
It was told by Gimli that there were few dwarf-women possibly no more than a third of the whole people.
“They seldom walk abroad except at great need. They are in voice and appearance, and in garb if they must go on a journey, so like to the dwarf-men that the eyes and ears of other peoples cannot tell them apart. This has given rise to the foolish opinion among Men that there are no dwarf-women, and the Dwarves ‘grow out of stone’.” (LOTR, App. A)
The population of the Dwarves increased slowly, and this was due to this fewness of dwarf-women.
Much like the other characters, the Dwarves took one life partner, whom would be a wife or husband. Less than 1/3 of dwarf-men marry, and not all women desired husbands. Some desired none while others desired none that they can get. Much like the women, there were also men that decided not to marry, being engrossed in their crafts.
Reincarnation
The Dwarves had traditions that were known to Elves and Men. They had beliefs that allowed for re-birth, though that could be attributing to that of the Elves.
“…the reappearance, at long intervals, of the person of one of the Dwarf-fathers, in the lines of their Kings – e.g. especially Durin – is not when examined probably one of re-birth, but of the preservation of the body of a former King Durin, to which at intervals his spirit would return.” (NoME, “Elvish Reincarnation”).
It is suspected that Durin was not being rebirthed, but rather, his spirit would return due to the preservation of the body of a former King Durin.