The leprechaun effects look very high tech and complicated, but most of them were achieved very simply by placing the "normal sized" actors closer to the camera than the "tiny" ones and lining them up on the same horizontal plane through the lens so the distance between them could not be detected. This technique is known as "forced perspective."
When Darby is lured to the well on the mountaintop it is not his horse that he was chasing, but a pooka - a mythological beast that can appear in the form of various animals. When Darby later learns that Katie is chasing a horse, he recognizes that this is the same pooka. Pookas can either be a danger or a friend. The best known of all friendly pookas was a six-foot-tall rabbit by the name of "Harvey (1950)."
The lighting used to make sure the actors were kept in proper perspective without seeming false used up so much electricity it apparently blew out a substation in Burbank when the lights were turned on without warning.
In Irish legend, the Banshee is often said to be seen combing her hair as she approaches. Although the Chroma Key technique makes it difficult to see, the Banshee that comes to Darby is indeed combing her hair.
This was the movie that brought Sir Sean Connery to the attention of Albert R. Broccoli, who then went on to cast Connery in his most famous role as James Bond in "Dr. No (1962)."