Here's how it is in the Tolkienverse:
Supreme Being: Illuvatar
The A-Team: The Valar (Aule, Yavanna, Mandos,Morgoth)
The B-Team: The Maiar (Gandalf, Sauron, the Balrog, Saruman)
Elves - first born, immortal, smart and magical but...
Humans: second born, mortal, not so smart...but with immortal souls. Elves don't get that. Elves don't even leave Middle Earth when they die - they go to a Valhalla run by a particular Valar in the West. Humans have a big part in Illuvatar's Plan.
Dwarves: created by Aule, chief blacksmith of the Valar, who got tired of waiting for Illuvatar to quit messing around and created his own life form. Got busted and was forced to put the Dwarves to sleep, so the Elves would show up on Middle Earth first.
Ents: Yavanna was Aule's wife, a tree-hugging hippie who was worried about what those damned dwarves would do to her lovely forests. So she created the Ents to make sure the dwarves wouldn't run rampant through her words and clear-cut everything.
Morgoth: the Satan of Middle Earth, he was the most powerful angel and he took the critters that had been created and mutated them. Orcs are mutated Elves; trolls, are mutate Ents. He also took some Maiar and made 'em into Balrogs, and also made dragons, werewolves and other fun things. This guy was Sauron's boss and when the Valar took him down, that war made the War of the Ring look like a minor street fight. Whole continents were rearranged.
To sum up: Elves are getting bored and are moving to the Western Continents to live with the Valar in an earthly paradise. Humans are going to have some sort of important role after the world ends. Dwarves and Ents are dying out because their creators weren't as cool and powerful as Illuvatar. Hobbits...who the hell knows?
(Source: The Silmarillion)