Elfs are magical creatures of nature, especially connected with the sylvan woods. The idea and cultural image of elves is diverse to a remarkable degree, and there is clearly no ONE cultural authority on their image. I think Gygax does a good job sketching the basis cultural view of elfs, and it is worthwhile to use his characterization as a jumping off point:
From p16 in the DMG 1e:
-Flighty and frivolous
-Concerned with natural beauty
-Primary activities: dancing, frolicking, playing, singing, poetry, humor, feasting
-Avoid the open water and underground
-Distrustful of strangers, but loyal
-Brave but not foolhardy
-Moderates in consumption
-Not materialistic for money or jewelry
-Fascinated by magic
-Tendencies towards haughtiness and arrogance
Elfs are the longest-lived and slowest developing race of demi-humans. The average elf won't reach breeding age until he/she turns 100 and will live at least 1000 years before dying of old age. The fact that elfs live and breed slowly defines the foundations of their racial behavior. As a rule, elfs want to be left alone to enjoy their version of the good life.
Elfs derive their power and longevity by close association with the mana-rich substances of the natural world: the sun, the wind, the water, and the trees and plants of nature. Elfs do not have an astral body, and thus, never have psionic powers. This makes them 90% immune to charm and sleep spells, and they save at +2 versus psionic blast attacks.
Elfs in Combat
Physically, elfs are smaller than humans, more lithe and dextrous. They make excellent bowmen and prefer to take down opponents at a distance rather than engaging them by hand. Their predominant weapons are the bow and spear, although some of them will carry swords gained in their contacts with humans.
They make extremely dangerous fighters in the woods, where they are experts at blending in to their surroundings and moving silently. They always apply hit and run tactics, often attacking from tree-mounted locations, and they will flee up into the trees as well.
As wild creatures of the woods themselves, elfs have a special affinity for wild animals. They are known to train birds for various purposes, including giant eagles, giant owls, and other birds of prey, as guardians of their lairs, and as messengers. They are also known to employ certain feline and canine species, which appear to be fully domesticated by them, known as the elven dog (Cooshee) and the Elfen Cat. Elf females are known to associate with the unicorns that find their home in the magical forests.
Elf Magic and Trade
Elf magic derives from their close association with the spirits of nature. Like human druids and shamans, they reverence the natural forces and become gifted in tapping their power. Earth magic, air magic, and water magic are their specialties. Those gifted with these powers rise up to leadership positions in elf society, and are considered the elf equivalent of clerics.
Elfs are also gifted in harnessing the magic of the trees and plants to produce various potions. The potions are the basis of what little trade the elfs engage in with the outside world. Living communally and largely unconcerned with treasure, elfs will trade primarily for metal and magical items. While not used as a medium of trade, the precious metals are valued by elfs for use in their artistic creations, so elfs will sometimes trade for gold.
Elfs in Human Society
A small proportion of elfs will seek adventure beyond their enchanted woods. Elfs are generally smaller and weaker than humans, so are rarely seen in combat careers. Despite their small frames and high dexterity, they are generally too good-natured, and love their bows too much, to seek careers as thiefs.
Because of their generally high intelligence, coupled with their natural magical natures, most elfs seem to gravitate towards the path of as magic users. Perhaps owing to their general lack of discipline, coupled with their need to return to their native forests, few elves do more than dabble in magic use, however, and none has ever risen to the heights of wizarding prowess.
The most successful elfs seem to be generalists, combining their dabbling in multiple fields. Many of them will learn the arts of fighting, thievery, and magic use at the same time, combining them in a way that would seem impossible to the average human, and non-sensical to the above average.
Elfs in Magic Item Creation
Most elfs avoid human society due to the value of their carcass in magic using circles. Frankly, no elf is safe in a human town. Elf skins are used in magical boots, cloaks, and gloves. Elf eyes are highly valued for use in potions of night vision, and their ears in various hearing aids. Elf hair appears to be an all-around general-purpose magical ingredient which enhances many formulae.