Dragons are basically nonexistant in the Flanaess these days. Most mortals will never see one, and if they do, it is probably because some cataclysmic event has unfolded. These powerful creatures tend to hide themselves away in places where most either don't know about or wouldn't dare travel to.
In ancient times, the dragons ruled all of Oerth. They partitioned the lands between themselves and built up massive hoards. At times they would war on each other, sending the other lesser creatures of Oerth scrambling around in panic. These dragons maintained vast armies of creatures they had enslaved, and sometimes they would pit their playthings against those of other dragons for mere amusement.
The dragons relaxed their grasp on Oerth as they began making forays into the elemental planes to enhance their powers. During their time of abscence, known as the Wingless Era, the other races of Oerth flourished. Great Elven kingdoms began to sprawl out from within the deepest forests, and Dwarven kings began striking the earth and carving out their labyrinthine domains. It is said that the wealth of the Dwarven kingdoms came when Falthak Mountaincleaver inadvertently tunneled into a dragon's hoard while building his new mountainhold. The treasures found there made his clan the richest people on Oerth for millenia.
When the dragons returned to Oerth, they were disgusted that their pets had put on airs and dared to lay claim to the land. The reprisal was swift. Ancient dragons attacked all bastions of civilization, murdering any who dared stand against them. They underestimated the power of these "lesser" races.
The elves put together squads whose sole purpose was to murder dragons. These highly trained warriors, with the help of superior Dwarven weapons, began carrying out raids against the dragon fortresses. Gnomes and halflings played their parts by sneaking into dragon lairs and poisoning their unhatched eggs, ensuring no reinforcements would be present to help halt the onslaught against the dragons. If only the dragons had banded together, they could have easily slain these upstarts, but greed and paranoia kept the dragons divided. The wise metallic dragons saw that a shift was coming. They made treaties with these newly powerful races and began to live in harmony. The chromatic dragons fought tooth and nail, and many of them perished.
After a time, even the metallic dragons were hunted by the scared masses. Though their leaders tried to stop the dragon hunts, it wasn't long before most of the metallic dragons were slain. A few still live in certain parts of the world in harmony with the smaller races, but these places are remote and usually hidden from all but the most obscure lore.
Today, the dragons whose whereabouts are known are exceedingly small. One, whose name is lost to all but the most knowledgable scholars, resides below Greyhawk. There are also old sailor tales about dragons living far to the south in the endless jungles. It is also a common story that dragons skulk around the wastes to the west, drawing upon the leftover magic from the human wars that took place there.
The mightiest of all dragons, Tiamat, the mother of evil dragons, now lives in solitude in the Dragonspawn Pits of Azharul. None but the other ancient dragons know how to access Tiamat's realm, which is said to be another plane of existence entirely. Tiamat is most focused on spreading evil whenever possible, and she currently bides her time, waiting for the perfect time to strike and exact revenge for all dragonkind.