Long ago the Dragon of Life came to this world and created life from lifelessness.  Soon, however, her brother, the Dragon of Death came to feed on the life she had created and there was a great battle.  Though he lost and was driven away, he planted the seeds of death, disease, and decay upon this world so that, eventually, all life would wither and die.  To fight this, She went to a mountain that was destroyed in their battle and breathed upon the rocks, turning them into eggs.  She left, but from these eggs hatched the dragons.
There are five types of dragons, not including the Ultimate Dragons of Life and Death.  The Grand Dragons represent the four elements, [url=http://cdn.playbuzz.com/cdn/59ef4d02-5b8e-4fc2-8603-e946873cd5ca/4207aafa-ab73-460e-8075-d690fae8106c.jpg]Fire[/url], [url=https://s-media-cache-ak0.pinimg.com/736x/29/20/66/2920667b4fc7cc2f254b4decf536433a.jpg]Water[/url], [url=http://vignette2.wikia.nocookie.net/starwars/images/3/3f/KraytDragon_NEGAS.jpg/revision/latest?cb=20090709062857]Earth[/url], and [url=http://img15.deviantart.net/3c02/i/2006/167/c/2/chinese_dragon_by_j_c.jpg]Air[/url].  They are the most powerful of the dragons, but the most limited in their powers.  They are immortal, never growing old but always growing, and their shape is governed by their element.
The Greater Dragons have powers that are a subset of those elements, or a combination of them.  They have more fine control of their abilities, but less power.  They continue to grow over their several thousand year lifespans.
The Common Dragons have combined or psychic powers.  They have more control but less power than the Greater Dragons.  They will grow slowly throughout their several hundred to over one thousand year lifespans.
The Lesser Dragons, often the size of horses, have more esoteric powers, but in general they are more specialized forms of powers that the other, greater, types of dragons have.  They can live for several hundred years, but stop growing somewhere between 250 and 300 years of age.
Petty dragons are the size of large birds at most and have the widest selection of powers possible.  They can have any of the powers of the other types, but little fine control of it.  They rarely live past one hundred years of age.
All dragons can communicate through a combination of empathy and body language know as "Dragonspeak", allowing even the smallest of dragons to communicate with the others.  Humans can also learn Dragonspeak, though their "accent" will make them hard to understand.  They can also use the abilities of dragons either by bonding with one, becoming "Dragon-kin", or by using the Stones of dead dragons.  Both methods have problems, however.  Dragonstones will quickly weaken once the dragon dies, as the energy within will be used to try and revive the dragon, and must be removed quickly to preserve their power.  Larger, and more powerful, stones come from larger and more powerful dragons, which makes gathering them a dangerous profession.  Bonding with dragons will make a person take on features of the Dragon as well as their power, which will slowly make you an outcast from society.

The origin of the mortal races is said to have occurred when the dragons tired of fighting among themselves and wished for something to entertain them.  They gave their prey the gifts of speech and intelligence and kept them as pets.  Over the centuries, however, the pets grew more and more clever, devising methods of communication which relied on sound or distinct shapes instead of the Dragonspeech.  Eventually the mortal races, regardless of their form, began to crave freedom.  They fought back against their masters and, eventually, teamed up with those dragons which were willing to let them be free.
It has been three hundred years since the War of Freedom began, and the mortal races, thanks to their technology, have begun to see an end in sight, a world in which the mortal races and the dragons can live as equals.

[hider=Known Dragon powers by type]
Dragons can naturally have any power at their level or above, though not Life or Death, as those are only for the Ultimate Dragons.  Example: Petty dragons can have any of them, Greater can only have the powers of Greaters and Grands.
Also, dragons essentially consider it a sin to to gain the magic of another dragon through bonding, as your powers were chosen for you by the Dragon of Life.

Grand: Pyrokinesis, Hydrokinesis, Geokinesis, Aerokinesis
Greater: Lightning, Ice, Heat beams, Ferrokinesis, Weather control
Common: Telekinesis, Telepathy, ESP (Battle sense), Psychometry
Lesser: Health transfer, Energy transfer, Illusion
Petty: Rapid plant growth, Calming presence/song, Enraging presence/song, Glowing, Restore health, Restore energy, Heat-sight
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[hider=The Plot]
The village of Triom sat at the base of a mountain, just south of a large lake, on the banks of a river coming from that lake.  Fifty-seven years ago a Greater Lightning Dragon by the name of Storm-cloud attacked the village.  Though they lost many of their numbers, the guards of the village were able to subdue it with the help of Zeris, the guard Captain, and his Fire magic.  Rather than kill the Dragon and take its Stone, however, Zeris offered to spare the dragon's life if it swore fealty to him and paid back the people of the village for all its attack had cost them.  Out of a fear for its life it agreed.
Zeris swore to it that as long as it was a friend of the village he would treat it as a servant, not a slave, and that it would be free to go once its debts were paid.  With this commitment to each other and him sparing its life, a bond was formed between them.  He nursed it back to health and, in time, the people of the village came to appreciate having a Dragon around.
Many people flocked to the village with a Dragon protector and, in time, it became a great city.  When Storm-cloud's debt was paid off it realized that it liked living with the mortal races, and had even gained the power of speech from them.  It decided to stay with the city, and the people threw a festival to celebrate its decision.
Now, however, a Grand Fire Dragon, Inferno, has been seen flying towards the city.  Old Zeris and Storm-cloud are not enough to defeat it and, despite the many mortals with lightning magic, the entire force will not be enough to do much more than buy the people time to evacuate.
Zeris called his troops and the city's volunteers together to confess something to them.  Sixty-one years ago, before he came to Triom, he was a Dragon Hunter.  His group of five came upon a Grand Dragon which was hibernating in its cave, guarding six eggs.  They stole the eggs and, when they were sure they had gotten away, they sold one of them, keeping one each for themselves before parting ways, now rich.  Zeris waited for his egg to hatch and, greedy for the dragon's stone, killed the newly hatched dragon.  That is how he gained the power of Fire, as he still carried the Stone.
We must warn the other four members of his old team, or Inferno will surely seek them out as well so that it can have its revenge.
[/hider]