Your race determines your starting statistics, body size, and available jobs. Some races start with racial abilities.
Human - Humans are average in all statistics and size. They have the most job choices due to their versatility.
Elf - Elves are slightly smaller than humans and aren't as strong. They tend to be more intelligent and coordinated however and make excellent archers and spell casters. They're a proud race and often won't consider less dignified jobs.
Half-Elf - Half-Elves are taller than elves, but smaller than humans. They're more hardy than their elf cousins but less intelligent and coordinated. They share much of their human versatility making them great hybrid characters.
Dwarf - Dwarves are smaller than humans but just as stocky. They have great strength for their size but tend to be slower to act.