Basically, as near as I understand, we define species by whether or not the members can interbreed true.
So, a horse and a horse gives you a horse, which can make other horses. Horses are a species!
A horse and a donkey give you a mule, which cannot reproduce. Mules are not a species.
And a horse and a giraffe cannot breed. They are different species.
Then we have dogs. I have read that dogs have a 'slippery genome'. Looking up what that means, exactly, did not yield much for me, and that's okay. It is enough to know that a chihuahua and a tibetan mastiff are the same species, despite being vastly different in appearance and size. They are both dogs. Dogs are just like that, from wolves to saint bernards, poodles to dachsunds. All the same species.
Hold that thought.
Okay so, take this slippery genome idea, and apply it to the typical fantasy world pastiche. We will call it Gaia, because I cannot be bothered to come up with a better name.
Anyway Gaia is a world much like Earth. Except it's called Gaia. And the maps are all different because I like making coastlines with the macaroni method. And it has two moons, because moons are awesome, and I have a plan for that second moon later. And it's bigger than Earth.
I dunno, maybe four time the surface area.
And it is a lot less stable, but that's okay, we'll fix that in a moment.
Anyway, there are a handful of sentient races on Gaia. Gaians, Dragons, and, iunno, squid people. There are not enough awesome squid people. Nevermind them, we'll get back to them, let's focus on the Gaians.
Anyway, Gaians are big. Like, as tall as dinosaurs. Because there are also dinosaurs on Gaia. Awesome. Gaians raise dinosaurs and ride them and maybe eat them. Sure, why not. Dinosaurs are livestock to Gaians. And Gaians have weird large floppy ears, and tusks, and their skin color is the entire rainbow. Green, blue, purple, brown, pink, you name it, they got it. Also, a fine layer of fur across their entire body. The hair on their face and top of head have started to differentiate from body hair, but still, these people are furry. Faint fur. No big deal, right?
Except that Gaia is not stable. Anyway, big planet from outside of the Gaian solar system cruises through the local neighborhood of planets, wreacking merry havoc with orbits, and Gaia gets wobbled from its usual place, and this is just too much. For you see, Gaia has an unstable core. Lots of lava, and the tectonic landmass plates sitting on top of it are not as stable or as well-fixed as the ones we have here on Earth.
So, the Harbinger (that's what we are calling the rogue planet) rockets though Gaian's solar system (need a name for the solar system), bringing about an event known to the history books as the Devastation. Not just -a- devastation, THE Devastation, capital D. Because the orbit change really badly messes with Gaia's climate, and to boot, it triggers Gaia into becoming more stable. By releasing all that sweet sweet hot magma pressure from its core. Across the surface of the entire planet, the places where tectonic plates meet fissures and cracks and spews magma into the atmosphere, cannibalizing oxygen aggressively and also creating huge, nigh-impassible volcanic mountain ranges.
And this is where the slippery genome bit comes in. The original Gaians had spread across the surface of Gaia, but now they are seperated from each other, either by huge volcanic mountain ranges or by large expanses where continents have simply split into chunks, torn asunder. The oxygen cannibalization is important here, because all of a sudden, the planet's not as good at supporting megafauna. Most of the dinosaurs die off, and so do... well, most lifeforms.
But the Gaians, they are a hardy people, and clever, and in their little isolated communities, their isolated tribes, they bounce back. It takes centuries, and during that time, the slippery genome effect makes itself felt.
See, all the typical fantasy pasitche races? They are all just small Gaians. Some of them are very small Gaians. But the long term isolation means that tribes all trend towards being samish to each other.
So, the original Gaians? Recognized in the historical archeological record. Big boned giant people from the before time. Primordial Titans.
But who do we have today?
We have humans. Humans are small Gaians, tending to have monochrome skin ranging from pink to dark brown. Their ears are round, their eyes sharp, their noses small.
Elves are light, thin, small Gaians. Taller than humans, sure, but shorter than the original race. They have long pointy ears, and sharp eyes that see well at night, and lithe, thin builds. They appear androgynous, because frankly, their gene line never really got in on the whole testosterone gig. Their skin is a bit more rainbow hued than the humans - pink to dark brown, and also some blues, some purples, some greens.
Orcs are also small Gaians, but not as small as humans or elves. About the same height as an elf, but more muscle. They are almost as muscular as the progenitor race. They have short, pointy ears, and 'good enough' eyesight, but with the neat trick of thermographic vision. Their skin colors tend to green, brown, blue, and a dusky gray. They appear androgynous, because frankly, their gene line bought so hard into the testorine gig, everyone got some.
Trolls are almost Gaians. The climate change and the volcanic activity really did a number on them, but they persisted. They are easily taller than any other race. Unfortunately, they lost all semblace of fur - and it took the hair with it. And their skin is tough, calcified, a layer of armor between them and the harsher world that really would rather they not live anymore. They no longer have the floppy ears of the original gains, but instead ears as long and point as en elf. They have big noses, and keen eyes. They are muscular, but not in the bulky way. Gaia no longer supports that kind of bulk on a creature this size. Their muscles are instead like steel cables, giving them a lean, tight look.
Dwarves are very small Gaians. Shorter than humans, but with the muscle build of orcs. They share a lot of characteristics with humans, like skin colors. They have large noses, and thermographic eyesight. Also, they are dense people - physically, not mentally. They are tough.
Gnomes are also very small Gaians, a little shorter than dwarves, but without the muscle and build. They are light and lithe, and many other races consider them childlike in appearance.
Goblins are also very small Gaians, but unlike the dwarves and gnomes which share skin colors with the humans, goblins share the orc skin color. And unlike the dwarves, who have orc-like muscle, Goblins have troll-like muscle. Goblins are doing better than the trolls here, though - they still have heads full of hair.
Anyway, history marches on as these races establish themselves in their little regions. Civilizations flourishes, gets on track. The volcanic mountain ranges weather over time, as mountain ranges do, and eventually these peoples meet each other. But remember! Slippery genome! They are all still Gaians, so they can interbreed.
The long time apart means that the genome has a bit of base fixing, now, so a child is going to likely have the predominant build of one of the parents, but the children may pick up secondary characteristics that can be a mix and match of the parents. An otherwise elven child with the large nose of a troll. An otherwise orcish child with the floppy ears of a goblin. An otherwise human child with the tusks of an orc.
So that's the Gaians, with a slippery genome, giving rise to the various fantasy races!
Oh, and for the others, outside of the Gaians - dragons exist and are sentient, and of course there is magic, and of course the dragons have had a hand at making their own races, so the various fantasy dracoforms exist here. They cannot cross mix with the Gaians, because they are not the same species, but maybe they can mix with each other. Or not. Haven't thought that far ahead yet, I just wanted to make sure there was space for lizardfolk. Because I like snake people.
And the oceans have naga, because naga are awesome, and also Cephalids, because cephalopods are also awesome. They're not evil automatically because screw it, I want to avoid the good versus evil archetypes here. People are people. The cephalids might have a bit of orange and blue morality, because that's interesting, but not the kind that looks suspicously like always evil to the rest of us, because that's boring. More like the kind that often seems inscrutable, but hey, if you explain what you were thinking, okay I can sort of see where you were coming from but maybe next time ask before doing that, okay?
I need a better name for this planet.
Anyway. Short version: Fantasy world, where a lot of the fantasy races are all the same species, because slippery genome.