Balrogs are an extinct species of Discworld fauna once native to S'belinde. They were very large animals with an extremely resilient skin for which they were hunted; both waterproof and strong it was prized as material for boots, coats, tents and of course Balrugs. The Smith family were known to posses a Balrug.
Balgrog or Balrog
These creatures were first mentioned in Moving Pictures with their name spelled as Balgrogs. In the The Compleat Discworld Atlas their name is spelled as Balrog (likely to better fit with the rug joke).