In detailing the coming of the Age of Men in the Fourth Age, Tolkien made much mention of the concept of "Fading" or "Fading Away", implying that races such as the Ents, Dwarves and (especially) Elves were becoming extinct during this transitional period.
But I have always wondered what exactly he meant by "fading". How exactly does an entire species of beings just stop existing? It's obvious that the answer will probably contain a fair bit of the magical, but such things were never as overt in ME (esp. in the late 3rd age) as they are in other legendariums (for instance, Narnia or Earthsea). This makes it difficult to form a picture of just what this would have looked like.
Did they just disappear into thin air? Is this something that just happened to them or something they had a hand in?
How do you think the Elves* or Dwarves "faded" from existence? What should we take that to mean? Do you think this includes the Hobbits (it was never explicitly mentioned that they shared this fate)?
* = And, for the aficionados, I am of course referring to the various Sindarin/Silvan/Avari/other elves that (presumably) would not have departed over the sea to Aman.