Magic
Supernatural Powers
Supernatural Powers, "Magic", is granted by the Elder Dragons to specific individuals; it is not hereditary, although the Dragons may appear to favor a family for magic power. In Asmythe that magic can manifest in two different ways: "Dragon Magic", the magic of life and change; and "Arcane Magic", the magic of energy and movement.
Dragon Magic
The Elder Dragons sleep and dream and those dreams can affect the world. Some people have dedicated themselves and learned to become part of those dreams and through the dreams of the Elder Dragons affect the world.
Dragon Magic is the magic of life and mind, of thought and living things. It can not affect non-living things directly. Humans and Hobgoblins who have mastered the ability to walk in the dreams of dragons find they can affect the emotions of others and even cripple or heal other people. Outsiders can not do any kind of Dragon Magic, only those native to Asmythe and living in the dreams of the Elder Dragons are able to affect those dreams.
Dragon Magic can only directly affect living things. It can not affect non-living things. It can change living things in any number of ways, including mind-affecting ways. Anything animated by Ilthid Magic may be considered a living thing for the purpose of mind-affecting magic, because the force that animates them is a living outsider.
Nobody knows why Dragon Magic can not affect non-living things. Some speculate that the Elder Dragons only dream of living things, and therefore can not "see" non-living things to change them. Others speculate that while life only takes days or years to change, rocks take centuries or millennia to change and that the Elder Dragons _do_ dream of these things but nobody has been able to maintain a connection to the dreams long enough to affect them.
Those who can work dragon magic use meditation and mental focus to effect change.
Arcane Magic
The Ilthids were masters of the planes, able to summon energy and outsiders from the expansive Cosmology of Asmythe. Some people have dedicated themselves to learning the language of the Ilthids and though the symbols and structures of that language summon energy and outsiders into Asmythe. It is easier to move energy from planes that are "further" from Asmythe.
Arcane magic is the magic of moving energy and things between the planes. It can not directly change anything in Asmythe. Humans and Hobgoblins who have mastered this power can summon bolts of lightning, bind outsiders to inanimate objects, and even create magical portals.
In the cosmology of Asmythe there are conceptual planes of thought and emotion. Through Arcane magic it is possible to summon a Fear Elemental, or a ball of Blissful energy; but it is not possible to instill those emotions directly into living things.
Using arcane magic disrupts the AEther that surrounds and protects the cosmos. When the AEther is disrupted by arcane magic is becomes more difficult to use arcane magic or a small amount of time. Depending on how badly the AEther is disrupted that could be spells of the same type are more difficult, or that all spells are more difficult; and the effect can last for hours, days, or years in extreme cases.
Those who work arcane magic use symbols and language to effect change.
Elven "Druid" Magic
The Ilthids themselves mastered both kinds of magic. But they did not rely on the dreams of Elder Dragons, they were able to alter living things directly through their own power. Some of that power was given to the Elves in the First Age. During the Second Age this power diminished and they learned how to access the dreams of the Elder Dragons. They developed their power into a mastery of nature. Elven priests are able to affect how plants grow and to talk to animals.
Dwarven "Artificer" Magic
The dwarves that have master Arcane magic are able to empower and animate their machines. For examples of dwarven magic read Girl Genius, or most other Steam Punk fiction.