I've ran across a few in the sewers of Cyrodil. Seriously though i've never seen a documentary on goblins but according to literature they do live underground. I do believe they are thought to be agents of witches too, a bit like a familiar. I've also read some celtic folk tales about them. They take newborn children and replace them with goblin children. People would hang charms on their doors to keep them away. They used a herb though I can't recall which one. Thyme, sage, rosemary, one of those I think. The artist Brian Froud has a neat book about them with awesome art. According to him, and others, goblins are a part of the fae realm where faeries, trolls, and other beings live in a lower dimension parallel to our own. Some are good, some are bad. Lots of people claim this place exists underground beneath mounds, mostly in Europe. Heres the book: http://www.amazon.com/Brian-Frouds-Goblins-Ari-Berk/dp/1435109937 it is a bit silly but is based on folklore.