The Ilthids are a strange race that lives deep underground, "underdark", much like the dwarves but they shun the daylight to a much greater degree. The greatest punishment an Ilthid can receive is to be banished to the surface. The Ilthids are believed to be an ancient race who building empires when the other races were still struggling to walk. Their connection to the Forge is surpassed only by the eternals.
Ilthids are also called "Progenitors", "Brain-Benders", and occasionally "Squids" by the other civilized races. Where goblins are brutal barbarians of the surface world the Ilthids are the cunning overloads of the underground. While the goblins were conquering the surface during the third age the Ilthids were reconquering the underdark. They seem to regard the other civilized races with contempt, much like we would view a mangy mut, and keept them as slaves and livestock.
Most of the Ilthids disappeared from the world at the end of the third age. Nobody knows where they went or why, but the sages think the appearance of the third moon has something to do with it.