Humans and Dwarves have always known of the other species so long as the two have existed upon the earth, but turned blind eyes to one another, speaking of each other as legends to each generation. In the 13th century, when underground mining using shafts and adits was developed, skirmishes broke out. The humans had infringed upon dwarven lands, the underworld. Again, there was an uneasy peace; the dwarves moved further underground and the humans stayed as near the surface as they could. In the 17th and 18th century, when the demand for coal increased around the world, it became necessary for the races to establish alliances. The result of these alliances were that the Dwarves' exposure to human technology radically revolutionized the advance of industry. Their minds were aptly suited to the mechanization of the age of industry. Within 100 years of the first compacts between humans and Dwarves, the Dwarves had far surpassed humans in machine related skills. They are responsible for the early development of many innovations which came nearly 50-75 years later in our own time stream, the Airship and submersible to name a few.
Dwarves remain in separate societies. They work with humans because it benefits them to do so. Only on rare occasions to Dwarves mingle in human society. In this way they are much like the Amish or Hutterites, choosing to live apart, in great underground cities.