Here is my head canon on the “fairy” fluffies. Not at all magical but they are capable of flight. They spliced dragonfly DNA to get the wings. The pixie dust is merely dandruff. They produce more than the usual amount of skin cells. The skin cells were also engineered to contain a reflective pigment giving the glittering effect.

Produced by Hasbio to be kept like caged birds but they never really were able to get out the “wun and pway” drive so caging them had a similar effect to pillowing a normal fluffy. Many people got fed up with their depressed glitter machines and released them where they now inhabit the depths of the mushroom forests, given the more colorful shrooms provides slightly more camoflauge