Muggles' Guide to Harry Potter/Magic/Goblin

Overview
Goblins are an intelligent race who coexist with wizards. They are short with long, thin fingers and feet. Their diet consists of meat, roots and fungi. Goblins converse in a language known as Gobbledegook.

Extended Description
Goblins are adept metalsmiths, and are notable for their silverwork; they even mint coins for wizarding currency. Due to their skills with money and finances, they control the wizarding economy to a large extent and run Gringotts Wizarding Bank. They are represented by the Goblin Liaison Office of the Department for the Regulation and Control of Magical Creatures in the Ministry of Magic.

Throughout wizarding history there has been a dispute between wizards and goblins due to errors on both sides. Goblins can be bloodthirsty and cruel towards wizards and consider them to be arrogant while many wizards consider goblins inferior. Goblins have in the past, resenting the fact that they occupy positions as second-class citizens, resorted to violence in the form of rebellions and riots.

Goblins harbor very different feelings about ownership than wizards - they consider the true owner of an object to be its maker rather than its purchaser, whom they see as simply renting the object until their death, and resent the passing of goblin-made heirlooms through wizarding families without further payment. Goblins can use magic without the aid of a wand, although they are insulted by the refusal of wizards to allow them to use wands. In turn, goblins conceal the secrets of their own magic from wizards. Their weaponry and armor are nearly indestructible when created and have a very particular property. A goblin-made blade such as the Sword of Godric Gryffindor will accept and incorporate into itself any material which makes it stronger. For example, Gryffindor's sword imbibed basilisk venom in Harry Potter and the Chamber of Secrets, enabling it to destroy Horcruxes in Harry Potter and the Deathly Hallows.

In some cases, a state of friendship exists between wizards and goblins (particularly Bill Weasley, who works as a Curse Breaker for Gringotts), and there have even been some instances of goblin-wizard interbreeding (Professor Flitwick has distant goblin ancestry, which likely accounts for his small size).

Analysis
The Goblins are portrayed in the series as being completely mercenary, interested only in gold and the work of their own artisans. Their loyalty does not come cheap, and at best is fleeting, lying as it seems to only with the main chance. Despite this, Harry does manage to enlist the help of Griphook in a mission to break in to a Gringotts vault.

Greater Picture
Goblins initially remain a neutral force in the fight between Voldemort and those who oppose him, claiming that it's "a wizard's war". Once Voldemort has consolidated his power, though, in Harry Potter and the Deathly Hallows, he attempts to assert some control over Gringotts. This interference in Goblin affairs by "wandbearers" causes discontent in many, notably causing the Goblin Griphook to leave Gringotts.