The Diminutive Fairy is the first of the little fairies who are know by many nicknames. Wee Folk, the Good People, etc.  Because of their small size, they easily hid and the people of Ireland were careful how they describe them, using nicknames such as those listed above plus others such as ; The Gentry, the Good Neighbors and the Honest Folk.  This is when the Fairy became very closely connected with the dead. Part of this shift in seeing the fairy as small was due to the continued and increased attacks by the church to degrade the Faery! The church in Ireland has never denied their existence, they know they are real! Their clergy readily admit this (did you know at Brigid's Well, the Catholic Sisters worship Birdget both as a Saint and as a Faery Goddess? LOL) so they ridicule them and try to tie them into the dark spirit realm. But, their fight has not been totally successful!
The other reason is due to the continued faery relationships with humans which brought forth a new generation of Faery who were smaller and less powerful in some way than their Ancient God and Goddess Ancestors.  From the Diminutive Faery comes several new lines of Faery, the First being the Elizabethan