Both uses start from the same plain picture — people called small — but they point in different directions, and neither grows out of the other. In one, small means small in power: the people at the bottom of a country or a company, the ones a decision lands on. In the other, small means small in body and mostly hidden: the fairy folk of Irish stories, named this way instead of being called fairies outright. It helps to read the phrase as 'the small folk' and then let the situation say which small folk is meant.
Two branches
權力上的小
這一支把「小」放在權力的尺上量。
noun · B2
Ordinary people who have no power — in a country, a company, or any large organisation — thought of as one group. It usually takes 'the', and it is usually said with sympathy, by someone pointing out who carries the cost of a decision.
小人物／基層民眾
傳說裡的小
這一支跟上面那一支只是共用了同一個「小」字，不是從它變出來的，兩條路要分開記。
noun · B2
In Irish and other folk stories, small magic beings who live out of sight — fairies, and leprechauns in particular. It always takes 'the', and story-tellers often use this name instead of saying 'fairy' straight out.
小精靈（愛爾蘭傳說中的仙族）