Historically, Centaurs were invented by the Myceans of the Ancient Greece, after they were invaded by horsemen - i.e. enemy warriors mounted on horsemen. Incidentally, other cultures invaded from horseback, also invented their own Centaurs. To them, Centaurs were real. Monsters were real in the ancient and medieval world, explained by means not available to the minds that invented them. So, the medieval and ancient worlds were rife with the Werewolves, Vampires and Witches, just as today's world is rife with today's monsters who scare people today, just as they did centuries ago. Today we have terrorists, serial killers, drug dealers, and child molesters. All of these exist, all of these are criminals who often perpetrate terrible and awful things, and just as in the past, the general public has a little or no knowledge as to the nature of the beast.
Werewolves were simple, by the standards of today - These were woodsmen, peasants living in the wilderness and their families, who learned to murder lone strangers on deserted roads, murder them, rob them, and take their valuables, disposing of the bodies. Few bothered with a stranger, unless they were noblemen, and nobody suspected anyone, who didn't have a personal connection to the victim. Of course, folks who murder and engage in predatory violence, develop predatory stares, which tends to unsettle others, hence the alien-ness that grew into a werewolf myth. Another name for a werewolf would be an economic serial killer. These proliferated well into 19th Century, where a friendly old lady inn keeper might poison her lone customers so as to enrich themselves. Witches of old, serial killer nurses of today, who intentionally kill patients in their care for whatever kicks that gives them.
Some of the most common creatures in D&D, such as Giants and the Dragons, have been imbued with philosophical and mythical meaning by the cultures that created them. Unfortunately mainstream D&D has none of it. Initially, it was a tactical miniature wargame, and the creatures were the mythological pawns for the battlefield, but then it became a more sophisticated role playing game with serious dramatic, plot and political elements, but the monsters did not grow up with the game, and it even retained its racist and/or colonialist tropes well into its Fifth Edition. Consider the way the game divides the non-human bipedal races into Demi-Humans, equal to or superior to humanity, and into Humanoids, sub-human and bestial.
When conceptualizing Midlands, in 2003 or so, I thought about making it a humans-only campaign precisely to avoid the racial stereotyping and race as character tendencies inherent in AD&D, which was superior in every other way to every other fantasy role playing game that I was considering for the campaign ruleset. Along the way I was deciding if I was going with no magic/low magic or with the standard AD&D magic spell system. Ultimately I decided in favor of realistic diversity and complexity, which meant that the human race had plenty of competition from other sentient species, some almost human, some not at all, and I came up with physics and cosmology for the campaign, that allowed spell-casting and I replaced the artificial concept of a level with a realistic concept of "Complexity", and thus, a first level Magic User can potentially learn a Fireball spell, but due to its complexity and lack of readiness on part of the novice Magic User, it will take a long long time to get the spell down, with a great teacher at the side, and chances of getting the spell are pretty slim, on the order of 2-5% per six months of full time study, but in theory, you can have a first level magic user throwing fireballs.
Regarding the non-human races, whether Elves and Dwarves, or Goblins and Orcs, I came up with suitable ideas for their origins, and I am sticking to the notions of the Pig-Faced Orcs, Pointy Eared Elves and Bearded Dwarves. I have also developed suitable ideas for the Goblins, Hobgoblins, and Bugbears. I was always fascinated as to what was the nature and differences of these three related creatures. Crappy work aside, I wanted to know if there was more to them, than the crappy artwork and varying degrees of Hit Dice to power these creatures. I worked out these creatures for myself, but I wanted to see what the official line was, so I stopped at one of the last few remaining Barnes and Noble bookstores to see what the Fifth Edition Monster Manual said about the Goblinoids.
I was quite disappointed, because nothing new has been added since the first edition. The Goblins are ruin rats, living in the darkness of caves and looted dungeons, sometimes riding wolves and breeding rats for household pets. They are weak and tend to be enslaved by the bigger Hobgoblins and Bugbears. Goblins are pictures as hook-nosed caricature of indiscernible origin, with large tubular ears, the kind plastic surgeons will modify for a fee. Next up are the Hobgoblins, they are bigger, stronger and better organized, than Goblins, and they fight an eternal war against the Humans and the Elves. Their identity is their military service. They have the same ugly faces as Goblins, but tend to wear their hair in a medieval Japanese topknot and are drawn dressed like the medieval Japanese men at arms. Interesting. Next, the Bugbears. These are big brutes, vaguely reminiscent of the great Bears, of course, these are cowardly and cunning, large sized and moving quickly. Again, these are portrayed as unidentifiable beast-men. We have one other interesting bit about the D&D Goblinoid race: Their armies are massed outside the human kingdoms, which serve as origins of the player characters. So, the Goblinoids are the literal D&D incarnation of the vilified enemies engaged in a war against the kingdom to which the player characters belong. The more interesting question is, why aren't PC's slaughtering human opponents, why are they looting and pillaging dehumanized humanoid enemies, evil by definition, to which the 5th Edition Monster Manual refers as an it? Could it be that the D&D writers are unknowingly perpetuating the stereotypes of the bygone era? I may be reading too much into a simple fantasy game, but the D&D writers also unknowingly perpetuate another dynamic, that of the weak and the dispossessed tribes. Consider that the Native American name Adirondack, means Bark Eater, at one time give pejoratively to a band of Native Americans who were forced out by other Native American tribes into a barren stretch of land, where they couldn't feed themselves.
Goblins, dwelling in caves and looted dungeons, filthy and ready to eat anything, ripe for enslavement by stronger others, sound a lot like a dispossessed weaker indigenous nation forced to live in a barren or non-productive area by stronger tribe. Furthermore, Goblins correspond to the weaker member of the tribe - the elderly and the young, the last ones to take food at the table, the bottom of the pecking order, the ones living in most squalor and poverty. Eventually, some of the little goblins grow into adulthood, pick up spears and other soldierly accoutrements, and morph into martial Hobgoblins. With years, some of the Hobgoblin soldiers, or Braves, develop into Warriors and capable leaders of men...er Hobgoblins into battle. Notice how the Bugbears are imbued with the attributes of a capable warrior - they are large, intimidating, they are strong, as warriors should be, and they are also deceptively quick, in other words cunning, Speed is what makes a fighting pro, as well as all those other Bug-Bear-ish attributes, and the Alpha-Male-esque language of barely legible grunts, growls and hollers. The Life-Cycle of a Goblin.