Dragons are the oldest race on Midkemia save for the Valheru. The Valheru tamed the Dragons and used them as steeds when they waged war across the Universe with other races or indeed amongst themselves. It was counted among some humans that Dragons were just a myth as they where rarely or never seen. This was actually due to their magic. The Greater Dragons possess the art of magic and could change form into a human to come and go as they please within human society.
Only the Great Dragons are sentient and have the art of Magic, but they are not hatched this way. They spend the first years of their lives as wild beasts and only after they reach a certain age and molt do they come to their sentience and their Magic as evidenced with Ryana Ryath's daughter whom Pug took in when she became sentient in order to teach her about humans and her powers.
At the battle of Sethanon when the Lifestone was activated and a rift opened to allow the Valheru entrance back to Midkemia they rode upon back of Great Dragons long since gone from Midkemia such as the Great Black, Silver, Green and Blue Dragons. When the Valheru were defeated and trapped within the Lifestone the Dragons were freed and dispersed around the Globe.