Germanic word
The modern English word elf derives from the Old English word ælf (which has cognates in all other Germanic languages).[1] Numerous types of elves appear in Germanic mythology; the West Germanic concept appears to have come to differ from the Scandinavian notion in the early Middle Ages, and the Anglo-Saxon concept diverged even further, possibly under Celtic influence.[2] Tolkien made it clear in a letter that his Elves differed from those "of the better known lore"[T 1] of Scandinavian mythology.[3]
Halfway beings
The Tolkien scholar Tom Shippey notes that one Middle English source which he presumes Tolkien must have read, the South English Legendary from c. 1250, describes elves much as Tolkien does:
South English Legendary "St Michael" 253-258
And ofte in fourme of wommane : In many derne weye
grete compaygnie mon i-seoth of heom : boþe hoppie and pleiƺe,
Þat Eluene beoth i-cleopede : and ofte heo comiez to toune,
And bi daye muche in wodes heo beoth : and bi niƺte ope heiƺe dounes.
Þat beoth þe wrechche gostes : Þat out of heuene weren i-nome,
And manie of heom a-domesday : Ʒeot schullen to reste come.[5]
Modern English
And often shaped like women: On many secret paths
men see great numbers of them: dancing and sporting.
These are called Elves: and often they come to town
and by day they are much in the woods: by night up on the high downs.
Those are the wretched spirits: that were taken out of Heaven,
And at Doomsday many of them shall come to rest.
Some of Tolkien's Elves are in the "undying lands" of Valinor, home of the godlike Valar, while others are in Middle-earth. The Elf-queen Galadriel indeed has been expelled from Valinor, much like the fallen Melkor, though she is clearly good, and much like an angel. Similarly, some of the Legendary's Eluene are on Earth, others in the "Earthly Paradise". So, did they have souls, Shippey asks? Since they could not leave the world, the answer was no; but given that they didn't disappear completely on death, the answer had to have been yes. In Shippey's view, the Silmarillion resolved the Middle English puzzle, letting Elves go not to Heaven but to the halfway house of the Halls of Mandos on Valinor.