That would be the Chimer, not the Dwemer. The Chimer were a clan/tribe of High Elves that conqured Morrowind after the war of the Red Mountain against the Dwemer (Dwarves) and Azura cursed the Chimer into Dunmer (Dark Elves)

Whatever the theory it still makes more sense than the ending of Mass Effect 3 (I had to go there xD)

But yeah, the lore forum has a bunch've pretty good threads on this.

People really need to stop being so rabid about the lore because in a fantasy-based game the devs can always and easily retract anything they've previously said by introducing a "lost tome" or having us discover a "double secret library" that refutes and rewrites everything we "know".

This is illustrated in a scene from Thank You for Smoking during a discussion about making a movie wherein smoking is prominently incorporated:
Nick Naylor (tobacco industry lobbyist): Cigarettes in space?
Jeff Megall (film producer): It's the final frontier, Nick.
Nick Naylor: But wouldn't they blow up in an all oxygen environment?
Jeff Megall: Probably. But it's an easy fix. One line of dialogue: "Thank God we invented the...you know, whatever device."

That being said, this is the prevailing theory:

The Dwemer aren't gone, they're just invisible, and very quiet.

Exactly.

Nope, else i would have noticed them, my perception lvl is 10... Oh wait wrong game. It seems that they may be invinsible after all. I am gonna give u credit for this very good theory.

Meh, I was disappointed when the mystery of Dwemer disappearance got dispelled by devs.

But, it is the Word of God. The Dwemer have become Numidium. That's the end of the line.

Speaking of Dwemer, do you think Yagrum Barnum scuttled out of Vvardenfell before Red Mountain went boom?

Then what was Akulakhan made up of?

Almost the same thing...but think corprus.

An entire race turned into corpses to form a giant mech? How the [censored] does that make any sense? It doesn't look like a bunch of bodies meshed together.

That's the point. If it makes any sense to you, it wouldn't be magical, now would it?

Heh. Now we know where the Thalmor get their delusions. [Not to mention the fact that retconning is so prevalent any more that it surprises no one when it occurs....]

An entire race turned into little ash piles to make the Skin of the Numidium. A group of Elves got together and decided that using the heart of an anti-Altmer God seemed like a great idea, in Morrowind it is hinted at that Shor may have been responsible for what happened to the Dwemer.
EDIT Between this and Cecliffs' post on Akulakhan, I think I know why no one can reproduce Dwemer metal...

Wait...woah. So Dwemer metal is made up of the ashes of Dwemer? What about dwemer ingots and bars? Dwemer robots and armor built by the dwemer? The underground halls that are literally made of this metal everywhere. The chairs, the gears, everything.

In the Tribunal Expansion, there were ash piles where the Dwemer were when the "event" happened and they dissapeared from existence.
My theory on the Dwemer Metal is that the Dwemer processed thier corpses into the metal that they used for quite a bit of thier construction. It would not be that different than people having thier cremation gases compressed into Diamonds today. If they could turn thier dead into metal, any corpse could have been converted into the metal as well. The Falmer may have been used as a source of raw material, and not as a labor supply. The dwemer were known for making the Divine Profane, and the Profane Divine.

Hey they have this wonderful supply of blind and unable to resist falmer cattle sitting in their caves.

No.
It is made from Dwemer souls.

Personally, I think the answer lies somewhere in the fact that you never see a female Dwemer.

Everything within the Aurbis divides (subgradiates) from larger things into smaller things (one becoming many). The Dwemer wished to be many becoming one. And they succeeded.

But someone forgot to flip the switch from "off" to "on"

We may have never seen a female Dwemer, but http://www.imperial-library.info/content/chronicles-nchuleft

Also, damn, this thread isn't very useful now that it's been moved to the Lore forum. It's just a matter of days until another topic exactly like this pops up in the Skyrim section again.

Good thing I regulated myself to the Lore forum only. (Until that gets moved/merged here as well.)

Possible, but we would still have to find a way to interact with them speak to them. And as you know. They are not very friendly. Maybe a clue/key lies in them, but it's to late though. Because most of Vvardenfell is destroyed in the Era of Skyrim. Most of the Dwemers Ruins are not even there anymore. All melted by the Lava of Red Mountain, but perhaps there might still be a chance. The Main Land is our only chance. We might still find Dwemer Ruins with Ghosts inside them.

Dwemer alloy be peeps,

Eyes seens it, I did.