The season finale of "Game of Thrones" is entitled "The Children" and the appearance of a fire-throwing human-like race but with small child-like bodies. While most of the characters and situations may be similar to real-life medieval history, the introduction of this new race emphasizes the ethereal and fantastical nature of the world of "A Song of Ice and Fire."
The "children of the forest," sometimes simply called "children" is a non-human race of people who inhabited Westeros long before the arrival of the First Men some 12,000 years ago.
What are they?
Similar to the White Walkers, the mystical people called the children have not been seen by human in thousands of years. They thrived in the days of the greenseers and skin changers, all of whom are mostly just mentioned in myths and legends meant as bedtime stories for Westerosi children. Greenseers are those with the ability to see into the future and into the past through the power of nature and the weirwood trees upon which faces were carved. The people with this ability are able to see what the tress have witnessed throughout history. Skinchangers, on the other hand have the ability to see through the eyes of animals much like Bran's ability to get inside his direwolf, Summer.
How did they live?
The children lived off the land and wore clothes made of bark and leaves. They used only wooden and stone implements in their daily activities often wielding weapons made of obsidian, which may be recalled as the material used in the weapons that were dug up by Jon Snow near the Fist of the First Men during their ranging. One of those knives was later used by Sam Tarky to stab and kill a White Walker.
They children dwelt inside rocks or underground or wherever they are able to find shelter. They also had a deep connection with nature and have mystical powers as demonstrated in the powerful fireballs used against the wights that were attacking Bran and his friends. They were also able to enchant their caves to be protected against White Walkers and their wights.
What do they look like?
The children are small humanoid creatures with dark skin dappled much like a deer's. They have large cat-like eyes and large ears which allow them to hear much better than humans. They also have only three claw-like fingers and a thumb.
What happened to them all these years?
The origin of the children is unknown except only for the fact that they were already inhabiting Westeros when the First Men came from Essos, across the narrow sea. These men came in with their own beliefs and practices and their own Gods, the Seven. Because of this, they burnt down the weirwood trees which led to a conflict and war between two races.
Eventually, both races ended the war in a pact where the children will remain in the forests while the men shall inhabit the open lands. The peace in Westeros was broken only through the invasion of the White Walkers during the long winter known as the Long Night. This led the children and humans to fight the common enemy until they were able to push the White Walker back far to the North in the Land of Always Winter.
In the many years that followed, the children retreated further into the forests and beyond the Wall, which was built to protect Westeros from the White Walkers. Interaction with humans became less and less frequent until they were relegated to being merely part of myths and legends.
In Season 4 of the series, it is revealed that not only are the children of the forest real, they are not extinct and some are still living among men. Now, with the impending threat of a long winter to come, they have made an appearance to Bran Stark and his friends and with them is Brynden Rivers also known as the last greenseer who has, through his powers led Bran to him with a yet unknown true purpose.