In my pseudo-Celtic, folklore-style homebrew world, I made a distinction betweeen elves and the Sidhe. The original gods of the world, the Lanimagh (somewhat like the Tuatha de Danann of Irish myth) ruled the world with their offspring, the sidhe.
At this time, Humans were littlre more than cavemen. As Humans grew more and more civilized, the Sidhe retreated farther and farther from them until Alignn, the mother-goddess of the Lanimagh, sacrificed herself to create a place were all the children of the Laigmagh could go to seek refuge from the contaminated curiosit of Humans.
This is the creation of the Otherworld, Addalon. Some sidhe-folk, however, decided not to retreat to Addalon with their brethren, and remained behind in the Mortal World. These are the ancestors of the elves--creatures related to the fey and the Sidhe, but, having been cut off from the magic of their kin, lost most of their glamor and became as they are now.
The elves of my world are identical to those in the PHB, with the exception that if they have a Charisma of at least 12, they can enter the Otherworld if they somehow find a portal which will allow them to do so. I have also changed their favored class from Wizard to Sorcerer, which harkens back to their magical heritage as descendants of the Sidhe and the Lanimagh.
I have made up my own versions of the Aes Sidhe, Gwraggedd Annwn, Plant Annwn, Lhiannan Sidhe, Baobhan Sidhe, and other "fey elves" for those rare occasions when one of the true Sidhe crosses over into the mortal world for adventure and/or mischief.
