Before a certain fantasy saga by J.R.R Tolkien was published, the only accepted plural for "dwarf" was "dwarfs". (Hence, Snow White And The Seven Dwarfs.) The plurisation "dwarves" was a deliberate deviation used by Tolkien to lend his prose a mythic quality. If you're a stickler for accuracy (and not writing a fantasy novel) you'll be wanting to use the former.
In addition to being a best-selling author, J.R.R Tolkien was a celebrated linguist who was endlessly fascinated by language. As any Middle-earth aficionado will tell you, Tolkien single-handedly created entire alphabets and languages for his fictional world; but he also tweaked English when it suited him. As he explains in the voluminous appendices to The Lord Of The Rings:
It may be observed that in this book as in The Hobbit the form dwarves is used, although the dictionaries tell us that the plural of dwarf is dwarfs. It should be dwarrows (or dwerrows), if singular and plural had each gone its own way down the years, as have man and men, or goose and geese. But we no longer speak of a dwarf as often as we do of a man, or even of a goose, and memories have not been fresh enough among Men to keep hold of a special plural for a race now abandoned to folk-tales, where at least a shadow of truth is preserved, or at last to nonsense-stories in which they have become mere figures of fun. But in the Third Age something of their old character and power is still glimpsed, if already a little dimmed... It is to mark this that I have ventured to use the form dwarves, and remove them perhaps, from the sillier tales of these latter days. Dwarrows would have been better; but I have used that form only in the name Dwarrowdelf, to represent the name of Moria in the Common Speech: Phurunargian.
Although "dwarves" had appeared in English texts previously, it was not in popular use prior to the publication of Tolkien's novels. These days, it is not uncommon to find this plural in non-fantasy contexts, but this is technically the wrong form to use. As the Macquarie Dictionary explains (emphasis ours):
"The first plural form given, dwarfs, has the greatest frequency and acceptability."
To be fair, the "wrong" spelling is not without precedent: the plural for "knife" and "wolf" is "knives" and "wolves", respectively. Nevertheless, for the time being, "dwarfs" remains the most widely accepted form outside of Dungeons & Dragons.
It should also be noted that people suffering from genetic conditions such as achondroplasia often find the word dwarf offensive -- in either of its plural forms. In these situations, you're probably better off using the medical term or a variation of the phrase "person of small stature". And definitely don't call them "Dwarrows". Accuracy and sensitivity matter.