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Well, the meaning is pretty obvious. Whether people so very long ago had the same ideas about elves that we do is most unlikely: they were living at a time when an elf wasn't just a character in a story. Elves were real, and could do things that people couldn't. Since they were supernatural, you couldn't accuse, attack or take revenge on them, and this made them frightening. It also perhaps made people envy their powers. So, it must have been important to get on the right side of any elves in the neighbourhood, to keep yourself and your family safe.

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And that could include anything from leaving food out for them to, yes, giving your children names with 'elf' as one of the elements. You would be showing respect, and they might just leave you alone, or give you and/or your 'elf' child their protection.