On the topic of lore, dragons are extremely rare in Tamrial, they were common in Morrowind until the skylamps (cliffracers) drove them out and so most moved to Cyrodiil but they are extremely rare there and avoid contact, all are protected by the empire and there may be one underneath the imperial palace through secret tunnels, however there is none in the game, possible reasons for this: They smell you coming and avoid you, they adopt different forms for protection, they are in locations hidden and protected so well you can't find them (possibly in places levitation is required to reach), and there is one last reason which I believe best explains it all, it was the reason used to explain why there are no dragons in Morrowind, even though it is perfectly acceptable to believe skylamps drove them out, however it is a reason which can be used for Cyrodiil as well... "Dragons? Oh, they're everywhere! You must fly very high to see most of them, though. The ones nearer the ground are very hard to see, being invisible." they are there, your just not flying high enough, which is why M'Aiq saw one, Khajiit are natural flyers.
Also the dragon people are different from dragons, they are semi humanoid.
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