These Elves and demons apparently were races of physical beings, living throughout the cosmos and on Earth.
It seems that the same goes for different species of angels or Anunaki if you will.
Those two celestial angels,
Aza and Azael, said to the Holy One, blessed be He, 'If it would have been us on
earth, like man, we would have been virtuous...As
soon as they descended to earth, the evil inclination seized them, as it is
written: "And they took them wives of all whom they chose". They
sinned and were deposed from their sanctity.