The Dragons were created in the First Age by Morgoth. It is stated in several places that they are 'great spirits', which suggests that they may be fallen Maiar (like Sauron and Curumo). Dragons were capable of breeding on their own, and the maps in The Hobbit suggest that the Withered Heath to the north of Rhovanion was their spawning ground.
All of Tolkien's dragons shared a love of treasure, immense cunning and guile, subtle intelligence, great physical strength (and size), and a hypnotic power called 'dragon-spell'.
There were various different types of dragons in Middle-Earth. Some slithered like snakes, some walked on four legs, and some had wings. There is a definite distinction also between the Urulóki (singular Urulokë, Fire-drake) and the Cold-drake mentioned in Appendix A of LOTR.
Only four dragons are named by Tolkien, as follows:
- Glaurung - Father of Dragons, a wingless fire-drake. He was the first dragon to appear outside of Angband, first coming forth in 260 FA, during the Siege of Angband. His appearance at this time was too premature, as he was young and his scales were not yet proof against arrows. Thus he was driven back to Angband by the archers of Fingon. He was eventually slain in 498 FA by Túrin Turambar, but not before causing much grief and evil through both his physical might and his evil cunning.
- Ancalagon the Black - Greatest and mightiest of all dragons, and the first of the winged fire-drakes. Ancalagon issued forth from Angband near the end of the War of Wrath (545-583 FA), leading a fleet of winged dragons. So powerful was this assault that the host of the Valar was driven back from the gates of Angband onto the plain of Anfauglith. Eärendil (son of Tuor, father of Elrond & Elros) duelled with Ancalagon for an entire day, and at length prevailed, pitching Ancalagon onto the three-peaked towers of Thangorodrim. This destroyed both the dragon and the towers.
- Scatha - A long-worm of the Grey Mountains. Slain by Fram of the Eotheod (an ancestor of Eorl the Young). Scatha's hoard was taken by Fram, but his claim was disputed by the Dwarves of that region (at the western end of the Ered Mithrin lay Mount Gundabad, an ancient Dwarven holy site). Fram rebuked this claim, sending them instead Scatha's teeth, with the words "Jewels such as these you will not match in your treasures, for they are hard to come by". This later led to his death in the ensuing feud with the Dwarves.
- Smaug - The last great dragon of Middle-Earth, a winged Urulokë. Smaug appears in The Hobbit (although his name was brought up at a meeting of the White Council, and the quest of Erebor was undertaken partly to ensure Sauron and Smaug did not work together), as the dragon who took Erebor from the dwarves. He was slain in 2941 TA by Bard the Bowman.