From Discworld & Terry Pratchett Wiki
Goblins are a small humanoid species on The Disc. They were generally despised by most other species until the events of Snuff, where they made their debut appearance and their culture was fleshed out.
Ponder Stibbons once played the role of Third Goblin in a school play.
Work and Culture
In a discussion about Dwarfs keeping up the old traditions, it is said that rich Dwarfs in non-Dwarfish professions, such as the clerical trade, will employ goblins to do nothing but hit small ceremonial anvils with small ceremonial hammers all day, purely to create the sort of atmosphere in which a Dwarf finds it easy to think. They are also mentioned in Reaper Man, in an excerpt from a Merchant's guild publication, as having delicatessens in the Shades.
Goblins, like some Dwarfs, typically live underground in large cave systems. In Ankh-Morpork they primarily work for Harry King in his industries. After the events of Snuff their reputation was enhanced and they now find work in more prestigious locations where their natural gifts with machinery come in handy, such as on the Clacks system or Moist von Lipwig's new railway engines.
Due to their former low reputation Goblins used to be used as slave labour on plantations by unsavoury characters such as Gravid Rust.
Goblins may be incredibly talented musicians, with the young harpist and composer Tears of the Mushroom being a prominent example.
Relation to other species
Gnolls, in earlier books, are explicitly described as a sort of stone-goblin. (Use of the word "goblin" supports the position that originally, Terry Pratchett intended them to be the Discworld analogue of Tolkien's Orcs, as they are vicious, sadistic, murderous, and attracted to filth). However, by the time of Jingo, all that appears to survive of this original concept is the attraction to filth and possibly a little residual cruelty.
In Unseen Academicals, a new race, initially confused with goblins, is introduced to the Discworld, This association is refuted at the end of the book, where Lord Vetinari remarks that Orcs must have been bred from men - only humanity has the inherent cruelty requisite for being subverted into orcishness; goblins are too small-time. TP really doesn't have that much respect for humankind...
In Snuff, Goblins and their culture/religion are explored in greater depth. Their religion, Unggue, is based around the belief that everything that was once part of your body is always part of your body, and thus, it must be buried with you after death.
- Of the Lathe the Swarf
- Of the Wind Regretfully Blown ("Billy Slick")
- Shine of the Rainbow
- Sound of the Rain on Hard Ground
- Tears of the Mushroom
- The Cold Bone Wakes
- By adoption
On the change of the nature of Gnolls through the books: there is a famous critical comment on Terry Pratchett's work, comparing him to Tolkien, but with the caveat that "in these Détènte-driven days, Pratchett has no horrors waiting to emerge from the East". (He doesn't have an East as such, in fact).
It could just be that an Orc-analogue simply wasn't needed - look at the way Elves have filled the niche for a non-human Other, which is inimical to mankind - and having introduced Gnolls in an earlier book, they simply got recycled to fill a different socio-ecological niche more suited to Discworld. Which as an argument holds really well together until you get to Unseen Academicals and have to rip it all up and start again, when a new race, which might originally have begun as Goblins (or men - see the article) but was seriously improved on by Igors working for the Dark Side, is introduced.