Spirits & Souls
From the sourcebook, Legends and Lore:AD&D assumes that the anima, that force which gives life and distinct existence to thinking beings, is one of two sorts: soul or spirit. Humans, dwarves, halflings, gnomes, and half-elves (those beings which can have a raise dead or resurrection spell cast on them) all have souls; all other beings that worship deities have spirits. This latter group includes (but is not limited to) elves, orcs, half-orcs, and the other creatures specifically mentioned in the NON-HUMANS' DEITIES section of this work.
But what is the difference between a spirit and a soul, besides eligibility for Raise Dead? A simple explanation runs as follows: the multiverse can be viewed as a vast, sleeping entity. The spiritual energy of the multiverse, including the spiritual beings that dwell within it, are its dream. They are infinite and timeless, but are bound to their natures and can change only with great difficulty. The mortal souls of the multiverse are facets of the dreamer - in effect, the multiverse experiencing itself. They are constantly changing and learning, and they can reshape the world around them with the power of belief.
Spirits are natural outgrowths of their environment. They originated in the Ethereal Plane, which is the first and oldest of the realms of the multiverse. The so-called "Ocean of Fog" is a cloud of potentiality and possibility that emerges from the dreaming mind of creation. Within this cloud of potentiality, the first Ethereal spirits came to be; these are now known as "Fey" - or by a whole host of other names.
The Elemental Planes arose from the potentialities of the Ethereal, forming the building blocks of the natural world. They exist because spirits with similar natures naturally congregated together: hot with hot, dismal with dismal, and so on. Like the Fey, the elementals are manifestations and reflections of the plane from which they came.
The Material Plane came to be from the unformed matter of the Elemental; some believe that the Fey were responsible for this, and acted as "planar alchemists" to create paradises from perfect admixtures of the elements. With the Material came the next type of being: those who possess an animating spirit, but have physical bodies. These are the descendants of the Fey: the plants and natural beasts of the world, along with creatures such as elves.
In many ways, the beings of the natural world are similar to the spirits from which they originate. They tend to be weaker than true spirits, as they are not made wholly of spiritual energy. Instead, their spirit is a spark within their physical body, which diffuses back into the spirit world when they die. This weakness comes with an unexpected strength, however: they are not as unchanging and eternal as true spirits. Their bodies are vulnerable to age, disease and destruction, but this very impermanence gives them the ability to change and grow. Those who are closer to true spirits, such as elves, find it harder, however.
Unlike spirits, souls do not have any spiritual power of their own. A soul by itself is an invisible, immeasurable thing. As such, they require a spirit and a physical body to survive. For this reason souls - aspects of the dreaming multiverse - did not enter the world until there were natural creatures for them to inhabit. The soul does not rest easily with the spirit, however. One is an agent of finity, change and ambition; the other is an agent of infinity and a timeless part of the natural world. As such, creatures with the strongest souls tend to have the weakest spirits. Beings like dwarves, which have both strong spirits and souls, tend to live longer - but they breed slowly and find it difficult to adapt to change.
Souls are unique in that they have the power of belief. Spirits have it too, but their timeless nature weakens and limits it. Spirits are part of the multiverse, while souls are its source. They generate spiritual energy constantly through their belief, but they do not have direct control over it. At most, they can direct it towards a particular entity or concept. Otherwise, the power of their belief joins with the collective unconscious of all beings in the Astral Plane - the realm of thoughts and ideas.
When a creature with a soul dies, it holds onto its spiritual body and becomes a petitioner. What happens next varies; some are reincarnated into the world directly, while others are taken by a psychopomp into the Outer Planes to live out their afterlife. Some old, weary souls may leave the multiverse entirely and return to the True Source. For more information on this topic, read up on the afterlife.
The Magic of Spirits & Souls
The ultimate origin of everything that might be called magical is through the expenditure of spiritual energy. Although the different fundamental "types" of magic are very different from each other in terms of where they draw their power, the energies of the spirit are always involved.
Innate Magic is manifested by spirits and by creatures with strong spirits inside them. The glare of a basilisk, the breath of a dragon, and even an elf's infravision are all examples of innate magic. Its source is the internal reservoir of spiritual energy within the spirit, and it is replenished by their connection to the Inner Planes. For example, a red dragon's fire is replenished from the Elemental Plane of Fire. Even creatures with very weak spirits have some form of innate magic, though it can be very subtle - in humans, for example, it is what we might call "instinct" or a "gut feeling".
Druidic Magic is used by druids, shamans and some Fey. It is similar to innate magic; instead of drawing on your own reserves of power, however, it involves attuning yourself to and drawing on the power of the Ethereal and Elemental Planes. To do so requires a deep devotion and connection with the natural world, which comes most easily to spiritual beings such as elves.
Arcane Magic is the magic used by wizards and sorcerers. It draws spiritual energy from the Astral Plane and as such, it is the magic of mortals - since it is their belief that primarily fuels the Astral Plane. In short, one who learns the ways of magic is discovering how to gain access to the bottomless well of spiritual power that is the collective mind of all creatures. Although mortal creatures are the ones that give the Astral Plane its power, any creature with a strong mind and a great deal of patience can initiate themselves into the mysteries of the arcane.
Divine Magic is the magic used by priests and planar beings. It comes from the Outer Planes, which are scattered throughout the Astral. Just as the collective unconscious of mortals creates the Astral Plane, their faith in deities, and abstract ideals creates the denizens of the Outer Planes. The power of belief is significant, and the gods court the belief of mortals and reward them with the power to champion their causes.