There are two theories as to why Gnomes, as a separate race, appeared to have developed. The first, as unlikely as it seems, is the mating of Dwarves and Elves. The second theory is the possibility of a third wave of mutations that swept the land more than 1000 years ago.
Gnomes are extraordinarily competent at applying current technology to new items, including various forms of magic and weapons. They are credited with developing the repeating crossbow, explosive/poison arrows and bolts, scrying crystals, etc.
Due to the danger of developing these items, Gnomes have developed a resistance to magic and certain forms of damage.