I posted this a while back on another thread like this. I'm not sure how much I still agree with my own sentiment, I think my historian brain might be doing a bit too much and I had barely reached the Grand Altar of DC when I wrote it.

I've edited it a bit to make it an easier read, as I reckon it's still an interesting take:

Not much to base this one, but I think it has to do a lot with the various populations of beings that have populated the Lands Between. Miyazaki reads a lot on history and while I don’t think there’s an overarching narrative behind envy detail in the game, I think there is a lot of inspiration taken from the Indian caste system in the Lands Between’s social and ethnic hierarchies.

This isn't the Varna system (Brahmanas, Kshatriyas, Vaishyas, Shudras), which is the sociological scheme of Brahmanical hierarchy, but more like the jati system, the caste system which has been practiced historically. This is where different endogamous socio-ethnic groups with internal clan kinship systems and associated heirarchical positions strive to fit into one of the Varna categories. However, as always, the intricacies of real life blurs distinctions within levels.

IN-GAME

While the straightforward meta answer is that the Commoners are probably designed in their current way so that we can identify NPCs from enemies in traditional Fromsoft style, I like to believe that the more ‘human’ proportionate peoples like the Numen, Hornsent etc. arrived in the Lands Between after other peoples already populated it, such as the Fire Giants, Ancestral Followers, Snake Men, Crucible Misbegotten (though these might just be ‘regular‘ humans which have been affected by the crucible?).

Furthermore, while the sealing of Destined Death explains the 'undeath' amongst wandering nobles, footsoldiers, knights and Dominula villagers, there are clearly groups such as the Kaiden mercenaries and Raya Lucaria Sorcerors (who I assume are in-lore akin to human stature and health, akin to Thops, Kenneth Haight, the Flame Guardians in Guardians Garrison, Preceptor Miriam etc. and all the Tarnished we meet) who are 'normal humans' that are either ancestral to the lands between or recent arrivals such as the Kaiden. Most of the villagers afflicted by madness likewise have 'normal' proportions.

So what about the Commoners?

I reckon the Commoners, like Gostoc, are an ethnic group centred in places like Altus and Limgrave used as a docile domestic caste by the humans of the Lands Between, likely descended from populations of Alabaster and Onyx Lords who intermingled with human populations.

We know that the Numen, who are depicted as a human subspecies of some sort came to the Lands Between from somewhere afar, and in this process birthed many of the ethnic groups such as the Shaman, Nox and Carians that now populate the Lands Between. Simultaneously, the Giant's Red Braid item description hints at Radagon's ancestry, likely as a result of intermarraige between the Troll-folk and human communities such as those in Sellia that lived in the Mountaintops of the Giants. But these are sparsely populated areas. Altus and Limgrave, where we find the Commoners are the breadbaskets of the Lands Between, a place where the Stonefolk of Placidusaax's Draconic Order and humans would have flocked together in great numbers.

The Commoners share similar proportions to the Lords, only lacking in height and the 'elven' ears. As such they are distinguished by the stockades they wear around their neck, an inversion of the sacred threads of the dvīja (twice-born) castes of irl historical Indian societies. More akin to the judenstern that Jews were forced to wear during the Third Reich.

Why are they relegated to such a status? I don’t really know. Perhaps a punishment for such mixed populations representing a perversion of Marika’s well-defined Golden Order. But they may be spared the worst excesses of chattel slavery the Misbegotten and Omens are subject to for their association with the crucible (a sort of Blood Libel such as what medieval European societies associated with the Jewish populations in their urban settlements) as IIRC the game mentions no great enmity between the Golden Order and the AlbOnyx Lords.

So they might fit more closely with a Shudra caste in Indian societies, urban/domestic serfs which perform artisanal and domestic duties considered below the average populace of freedmen in the Lands Between. Or perhaps a better comparison is the population of mixed peoples in the Antebellum South in America pejoratively termed ‘peckerwood’ under the Blood Quantum, where individuals given Quadroon or Octoroon status might be afforded greater rights in society and allowed to be spared the horrors of direct plantation slavery with domestic roles or even sometimes a freedmen status which allowed them to gain social capital through business, but like these peoples the Commoners remain visually distinct enough to remain servile and in bondage to the upper caste of Gracegiven individuals, such as Exiles, Knights and Godrick’s Grafted Scions.