The original Irish name of these figures of folklore is "lobaircin'" meaning "small-bodied fellow."
Belief in leprechauns probably stems from Celtic belief in fairies, tiny men and women who could use their magical powers to serve good or evil. In Celtic folktales, leprechauns were cranky souls, responsible for mending the shoes of the other fairies. Though only minor figures in Celtic folklore, leprechauns were know for their trickery, which they often used to protect their much-fabled treasure.
Leprechauns had nothing to do with St. Patrick or the celebration of St. Patrick's Day, a Catholic holy holiday. In 1959, Walt Disney released a film called Darby O'Gill & the Little People, which introduced America to a very different sort of leprechaun than the cantankerous little man of Irish folklore. This cheerful, friendly leprechaun is a purely American invention, but has quickly evolved into an easily recognizable symbol of both St. Patrick's day and Ireland in general.