This, of course, is not Wayland, but Arthur Rackham's conception of Regin the smith, Sigurd's foster father, from Wagner's Ring Cycle.  Whether Regin is from a family of dwarves, giants, or something else is debated.  Wayland may be a dwarf, and to some extent Northern peope may have seen the dwarves a little this way.  This is not the only image, however, for Iduna, the beautiful keeper of the apples of immortality is of dwarvish stock, and cannot  be imagined as looking anything like this. 
      Wayland, or Weland, or Volund is the semi-divine smith of Northern tradition, and has much in common with the classical Haephestus (Vulcan).  If there was more lore about him than the story contained in the poem below, it is now lost, though he was a familair name throughout the Germanic world, and fine pieces of workmanship, especially weapons, were often attributed to him, just as they were to his classical equivalent.  It is not entirely clear whether he was a dwarf, strictly human, or something else.  There is a tradition that his mother was a mermaid.  Smiths, because of their seemingly magic power to transform matter, were often seen in early times as wielders of magic. 
      Like his classical counterpart, Wayland is lame.  Claude Levi Straus, in a study of Hopi Indian myths, came to the conclusion that beings born of the earth are lame, because the earth does not easily let go of that which it has.  This is a truly mythical formulation, and its validity is reinforced by numerous examples.  The ancient Thebans were called "earth-born," and Oedipus and many others of the royal family have names suggesting lameness.  Another lame figure is the Christian devil, who lives underground.  And, there are other, more remote examples. The fact that he is trapped on an island by a king who wishes to exploit his skills and that he escapes by making wings is very suggestive of the Greek story of Daedalus, and one has to wonder if Daedalus also was originally lame, but if so, the Greeks had apparently forgotten by the time the story was written.  All of these examples, of course, find other explanations for the lameness.  Heaphestus interefered in a quarrel between Zeus (Jupiter) and Hera (Juno), and was thrown from Olympus by his divine father.  This story has all the earmarks of an attempt to explain what was already present, but not understood in Greek myth--one lame god among a host of examples of physical perfection.  Oedipus was carried as a baby by a cord run through his feet.  The Christian devil has one human-type foot, and one hoof--enough to put anyone off-kilter.  And, finally, Wayland was hamstrung by king Nidud of Sweden, who wished to keep him prisoner for his skills.
      I first heard the story of Wayland in my childhood reading.  I did not ever particularly think of him as a divine figure until Trothmoot, 1991.  First, there was a blot to Wayland, along with those for Frey, Nerthus, and others.  Second, our car, which took us the 350 plus miles there, and then back again completely broke down within a quarter of a mile of home the day after our return.  The consensus of those who commented on the fact was that we ought to give thanks to Wayland.
      The poem below (Auden translation), is from the Poetic Edda, and tells all of Wayland's story that we have.  It seems to be more nearly two stories, the first about his marriage to a swan maiden, and the second about his captivity to King Nidud, and his vengance, which included murder, seduction, and rape.  There is a tradition that after his escape from the island, he flew on his wings to Valhalla where he was taken in by Odin.
The three swan maidens captured by Wayland and his brothers for wives.  Wayland and his brothers are barely visible lurking among the trees.
THE LAY OF VOLUND

Three maidens through Mirkwood flew,
Fair and young, fate to endure:
Winged maidens by the water's edge
Peacefully retted precious flax.

Olrun was the first; she took Egil for lover.
Swanwhite the second:  she took Slagfidur.
Hervor the third; she threw round Valund's
White neck wanton arms.

So they sat for seven winters,
Then in the eightth for home they longed,
In the ninth their dooms drove them apart:
Three maides through Mirkwood flew,
Fair and young, fate to endure.

The weather-wise hunters, Egil, Slagfidur,
Returned from the hunt.  The hall was silent:
The searched all about but could see no one.

East after Olrun Egil rode,
South after Swanwhite, Slagfidur,
But Volund sat in Wolfdale alone.
Red rings he forged, enriched them with jewels,
Rings he threaded upon ropes of bast,
Faithfully waited for the fair-haired
Hervor to return to his hearth-side.

When the Lord of the Njars, Nidud, heard
That Volund sat in Wolfdale alone,
He sent warriors forth: white their shield-bosses
In the waning moon, and their mail glittered.

They drew rein when they got to the gabled hall,
In they came through the end door,
Rings they saw, on ropes threaded:
Seven hundred all owned by Volund.

These they unthreaded, but there they left them,
All but one, just one they took.
Then the weather-wise hunter, Volund, came
On light feet back from a long road.

He piled up logs, prepared for roasting
A brown bear:  well burned the fire
Of wind-dried wood before Volund's eyes.

The lord of the elves lay on a bearskin,
Counting his rings; a red one he missed:
He deemed in his mind that the daughter of Hlovde,
Hervor, had returned to his hearthside.
Long he sat till asleep he fell;
What he knew when he woke was not joy:
He saw on his hands heavy chains,
His feet in fetters were fast bound.

'Who are the men who my hands have chained?
Who have fettered my feet together?'

Then the lord of the Njars, Nidud, answered:
'What good have you gotten, greatest of elves,
From our treasure, Volund in Wolfdale?'

Then said Volund:

'Was there not gold on Grani's Road?
Far thought I our realm from the Rhine hills.
Greater treasure we had in olden days,
At home in the hall, happy together,
Hladgud and Hervor, Hlovde's children,
And wise-counselling Olrun, Kjar's daughter.'

Nidud the king gave his daughter, Bodvild, the gold ring
he had taken from the bast at Volund's.  And he himself
  wore the sword which had been Volund's

Without stood the wily one, wife of Nidud,
In she came through the end door,
Stood there smiling and softly whispered:
'Woeful shall be he who from the wood comes.'

He gnashes his teeth when he notices the sword,
And on Bodvild's arm beholds the ring,
His eyes glare, grim as a snake's:
With a knife they cut his knee-sinews,
Set him on the island of Saeverstod.
There he fashioned all sorts of precious things for the king.  And no man except the king dared to voyage thither.
'From Nidud's hip there hangs a sword,
The blade I sharpened with a sure eye,
The blade I tempered with a true hand;
Now the shining steel is stolen from me:
Back to my smithy it shall be born yet.'

'Bitterest to bear, bitterest to behold,
Bodvild wearing my wife's ring.'

Fierce, unsleeping, at his forge he hammered,
Making for Nidud marvelous things:
He saw two boys, the sons of Nidud,
At the door of his smithy on Saeverstod.

They beheld a chest, they asked for a key.
Evil was on them as in they looked.
There were gems in plenty, precious stones,
And red gold to gladden their eyes.

'Come tomorrow, but come alone,
Gold an gems I will give you both.
Tell not the maidens, tell not the courtiers,
Let no one know of our next meeting.'

So they returned, the two brothers,
Said to each other: 'Let us see the rings.'
They beheld a chest, they asked for a key.
Evil was on them as they looked.
He struck off the heads of those stalwart boys,
Under soot-blackened bellows their bodies hid,
From both their skulls he scraped the hair
And set them in silver as a sight for Nidud,
Of their eyes he fashioned excellent gems
For his dear neighbor, Nidud's wife,
And out of the teeth which were in their mouths
He forged a brooch to bring Bodvild joy.

Precious beyond all price to Bodvild
Was the ring she had broken; she brought it to Volund:
'None but you are to know of this.'

'Mend it I can so the marred gold
Shall appear to your father fairer still,
In your mother's eyes look much much better,
While to you it will seem the same as before.'

Ale he brought her, the artful smith:
Long they sat till asleep she fell.
'Now all but one for my hurts are paid,
All but the most evil of women.'

'I wish that my knees be well again,
My limbs that were maimed by the men of Nidud.'
Laughing rose Volund aloft in the air,
Weeping fled Bodvild, away from the isle,
Afraid of her lover and her father's wrath.

Without stood the wily one, wife of Nidud,
In she came through the end door.
The lord of the Njars lay there resting:
'Nidud, husband, are you awake?'
'Awake am I ever and without joy,
Little I sleep since my sons are gone,
Cold is my head, cold were your whisperings,
Now with Volund I wish to speak.

'Learn me, Volund, lord of the elves:
Where are my boys?  What has befallen them?'

'Oaths first shall you all swear me,
By ship's-keel, by shield's rim,
By stallion's-shoulder, by steel's edge,
That you will not harm the wife of Volund.
Nor cause the death of his dear bride,
Who shall in the hall bring up our child.

'Go to my forge which your folly built,
There find the bellows blood-bespattered.
I struck off thei heads of your stalwart boys,
Under soot-blackened bellows their bodies hid,

'From both their skulls I scraped the hair
And set them in silver as a sight for Nidud,
Of their eyes I fashioned excellent gems
For my dear neighbor, Nidud's wife,

'And out of the teeth which were in their mouths
I forged a brooch to bring Bodvild joy,
Bodvild who goes now great with child,
Your only daughter, dear to you both.'
'Never have words brought woe more bitter.
For vengeance, Volund, in vain must I long.
No man is so tall to take you from your horse,
No sharp-eyed archer can shoot you down,
There where you hang, high in the clouds.'

Laughing, Volund rose aloft in the air:
Sorrowing, Nidud sat there after.

'Thakrad, best of thralls, go quickly,
Go to Bodvild, the bright-browed maiden,
Bid her come forth; her father awaits her.

'Is it true, Bodvild, as I am told it is,
That you and Volund, when you visited him
On the lone island lay together?'

'It is true, Nidud, as you were told it was.
Volund and I, when I visited him
On the lone island, lay together.
A day of ill-omen, an hour of sin.
Against his wiles I had no wit to struggle.
Against his will I did not want to struggle.
Notes
The poem, or more properly, the prose section with it, actually goes a little beyond Auden's translation in calling the three women, not merely swan maidens, but Valkyries.  The two types of supernatural being are often combined.  The poem does not say so, but the usual situation in such a story is that the men hide the feather garments, so that the women cannot fly away.  They seem to adapt happily enough to their new life, but alway escape as soon as they find where the garments are hidden.

Volund, or Wayland, is called an elf a time or two in the poem, even "lord of elves."  It is usually the dwarves who are the metalworkers, but dwarves themselves may be considered here as one group of the elves.  Elves seem to fall into several categories.
He is also said to be the son of the King of Lapland, which seem to be contrary to being an elf or a dwarf either one.

Grani's road--the Rhine River.  Since the smith is referring to the story of Sigurd, either this story is being placed in historical time, or the reference is an anacronism.

An oath not to harm his wife--most readers, like King Nidud, probably suppose at first that Wayland is referring to his swan maiden wife, and being unnecessarily cautious.  It would be nice to think that his concern for the daughter of King Nidud that he got pregnant went beyond care for his offspring to some concern for the girl, herself.  I don't see any evidence of that in the poem, however.

There is one other source for this story, Thidrek's Saga, but it is later, and is mostly based on the poem with embellishments, not all well-considered.  For instance, Wayland comes back with an army to punish the king--really, how much revenge does anyone need.