As a cultural ethnographer, it can be amusing to hear one race or another bandied about as 'confusing' or 'mysterious'.  Often it shows far more about the speaker than revealing any great truths about the species in question.

However, it is with some reluctance that I may have to conceed the point when discussing the religious practices of the halfling race.

While many halflings are perfectly content to adopt the practices of their neighbors, particularly the semi-nomadic travellers we often see in human cities; when one travels to the south and visits with them in their native lands of the Sea of Grass, or even visits long established 'Hobbitons' in larger cities one comes across one of the most unusual of religions.

Every generation 'elects' members of the 'tribe' and declares them to be 'gods'.  The chosen are not by popular acclaim, or by expertise in a given feild, but apparently chosen completely at random.  This might be viewed as a simple confusion of priests with their patrons, but for one unique twist.

The most distant tribe of the southlands is not only capable of chosing a random halfling in the city of Paravail in the North, but every halfling community around the world will all recognize that halfling as that generation's God of War, or what have you.  Note that this is by generation, there can be three or four 'God of War' halflings at a time, each serving a seperate age group.  

Halfling theology does not recognize dieties outside of the mortal realm. The chosen are not 'avatars' of some greater God, as one might suggest, and do not pass on to some higher state of existance when they die.   These individuals do not typically show great powers that one might expect from a God either, but are viewed more as authorities on their domains, or admistrative functionaries.  In fact, apotheosis might be the least remarkable facet of a given individual.

Further clouding the issue is the halfling conception of the soul, the afterlife. There is no heaven or hell for halflings. They believe that their 'life spark' is merged with the stuff of Creation, becoming a infestimal part of 'all that is'.  Their dead have no more personality than the average rock or speck of dirt.  Funeral rites are extremely pragmatic, removing the dead as expidiciously as possible, then throwing a orgiastic party for all interested 'mourners'. Children born from such parties are considered blessed, though exactly what that means is unclear to this observer.  While bastardy is generally frowned upon, funeral births are never, apparently, treated as 'Bastards'. It is common, instead, to view the missing parent (typically, but not always, the father) as the deceased being celebrated, regardless of original gender.  The closest practical reason for such births being considered blessed was the rather arcane comment made by on halfling to this researcher in that "they add to the All of things, not merely replacing that which is lost."

As one might imagine there is a small 'priesthood' of sorts for these unusual halfling Gods. Since all halflings seem to have an instinctive knowledge of who their generations Gods are, without need for proselytizing, this priesthood's primary function is to serve as assistants to their Gods in holy activities.  It is not surprising that the term for them most often translates to 'Little Gods'.