Author's note: I will use spellings here from the dialect of Gaelic I am most familar with. Please understand that there are seven currently living dialects of this language even now, and at one time there were hundreds. There are therefore many, many "correct" spellings for the people and place names I will use in this narrative.
HISTORY: The Sidhe are the remnant of what was at one time two races: the Tuatha de Danaan, and the Fomorii.
The Tuatha de Danaan did not originate in Ireland; rather, they came from another place, possibly another plane of existence entirely. Some of the speculations I have heard while collecting stories about them are that they were the survivors of Atlantis, that they were Minoan, and that they were from another planet. I tend to feel the Atlantis theory has the most credibilty, but the reader should be advised that I do not present this as a fact, only as what seems to me from my own knowledge to make the most sense.
To properly tell of the Sidhe I must begin with the two races. The Tuatha de Danaan were not the first wave of this race to come to the shores of what is now Ireland. Earlier waves had preceeded them, and some had survived while others had perished in a plague, the nature of which was lost since nobody survived and the only witnesses were the small band of primitive tribal peoples then inhabiting the land, who later came to be called Firbolg. When the Tuatha de Danaan (whose name means "People of Dana") arrived, they moved upon the land and met the Firbolg in what came to be called the first battle of Moigh Tuireadh (Moytura). They established dominance over the land and the Firbolg in the fifth wave of the "Invasions(1)". Rather than go into detail here on the battle, I will instead refer you to the links listed at the bottom of this writing, they contain info on the specifics.
Having established a seat of governance at Tara, they brought with them four great artifacts, one each from the four great Cities of their home lands. From Murias was brought the great Cauldron of the Dagda, who is a sort of father/elder figure among the Danaans. From Gorias was brought the Spear of Lugh, from Findias the Sword of Nuada and from Falias the Lia Fail or "Stone of Destiny"(2).
Rather then engage in a lengthy discussion of the key events surrounding the Danaan occupancy of Ireland, I will instead provide mythological links which do tell the story in reasonably accurate detail(3). I have also included a list of suggested reading materials, all of which I have determined are available online.
In time, the sixth wave of the Invasions, the Milesians, came and displaced the Tuatha de Danaan. This was not done in a cruel manner; rather the Milesians were honorable opponents and gracious in victory. They made the defeated Danaans welcome and one of thier number, the bard Amhairghin, even spent some time living among them. In the end, however, the Danaans grew to understand that the time of Man was ascendant and that it was time for them to leave. They withdrew into a realm beyond, through the barrows where they created the gateways into their underhill dwellings. These barrows were called "sidhe" in the language of the Milesians, which means "mounds". The Danaans came to be known as the Daoine Sidhe, or People of the Mounds. Over time this was shortened to just Sidhe. Thus, the Sidhe are what is left of the once-proud people of ancient Ireland, the Tuatha de Danaan.
APPEARANCE: Physically, the Sidhe are an extremely tall race, ranging from six-and-a-half to over seven feet tall. Body types can vary but they are generally of solid, muscular build. Generally fair-skinned, some clans which intermarried heavily with the Fomorii do have dark skinned individuals. Facial features tend to be strong and well-defined yet delicate, with high cheekbones, narrow, pointed chins, somewhat slanted eyes and straight, aquiline noses. Hair and eye color come in all the same ranges as humans, however yellow and lavender eyes are also common, as is silver or pale lavender/blue hair. The eyes are slit-pupilled and ears are small (human-sized, not Elfquest-elf sized) and curved up into a very slight tendency towards points.
CULTURE: During their Golden Age following the Invasion, the Danaans were a warrior race. They were not simply savage barbarians, however; Danaan culture was very evolved and the Danaans possessed technology. Rather, they were a highly evolved and very old warrior culture with very specific customs, rules and laws, and their warlike tendencies were an outgrowth of their generally passionate nature. The Danaans were also accomplished in the arts and were a very learned race. The great Cities of the Danaan homeland were centers of vast knowledge of the arts, sciences and architecture and while they never reached the same pinnacle of civilization after coming to Ireland they did leave behind them a legacy of art and knowledge among the Milesians, teachings which formed the foundation of Irish Celtic culture for centuries to follow. Sidhe culture in the Tir now echoes the former glory of the Great Cities, but the Sidhe are a reclusive and complex people now, seldom given to interaction with the world Above. They remain a curious and restless people, leading many of them to incarnate in the here-now.
MAGIC AND RELIGION: These are not separate things to the Sidhe. The Sidhe creation mythos teach that they were born of the union between the great Creatrix (Dana) and the stars themselves, and that the energies of magic and immanence (connection to Deity) are inseparable forces that run through every living thing. What is unique in the Sidhe worldview is just what constitutes "living". Everything in the Sidhe cosmology is a living thing, even rocks and handmade objects are believed to retain living essences of the things they once were. Thus, magic inhabits everything from the majestic redwoods and the magnificent big cats of Africa to the sand along the beach and the chair in your dining room. Nevertheless, the Sidhe relationship to Deity is not one of "worshiper and worshipee" but rather that of children seeking to learn and grow so that they will be in greater tune with the parent. The Sidhe consider the God and Goddess to be present, immanent and welcoming and as such approach prayer and commune with Deity conversationally rather than in supplication. Sidhe religion also does not teach that Darkness and Light are cosmic opposites in contention but rather in balance, and that the good must balance with the bad to create the whole in balance.
POLITICS AND GOVERNMENT: At one time, the Sidhe had a sort of enlightened monarchy with an elected king who was not so much a ruler as a leader, more information can be had among the provided links. Currently, the Sidhe do not adhere to any sort of top-down managed formal political structure. Rather, it is a sort of benign anarchy, with a sort of loose-knit and rather informal council that acts as intermediary between the various Houses. Other than that, everyone pretty much does their own thing, makes their own arrangements and it all sort of hangs together somehow.