A goblin is a magical, radioactive, living stone. It looks like a chunk of gravel, about half the size of the average human's closed fist or heart, with a greenish glow that usually varies between almost imperceptibly faint and as bright as a candle. The goblin's light can become much brighter if the goblin becomes highly emotional.
A goblin possesses no sense organs of their own, no limbs or mouth, no differentiated body parts at all. In their naked form, absent a host, they do not perceive the outside world, or eat or breathe, or die of sickness or old age. They barely think or dream or perceive the passage of time. But they do not like this state of affairs, isolated in the yawning void of their own mind.
If the goblin is inserted into the chest cavity of a humanoid creature, or the center of mass of some other "compatible" creature, they will take over control of that body. If the creature somehow survives this process, they will live in the back of their own mind, much like the goblin does in their naked state, except dimly aware in some slight way of what their body is doing as the goblin wears it, truly lives in it. They would regain control if the goblin were removed (again, without somehow killing them).
If the creature dies in the process of having the goblin inserted into their body, or if the goblin is inserted into a fresh and more-or-less intact corpse that has not yet begun to rot in earnest, the creature's original "mind" or "soul" or "consciousness" will be completely gone. However, the body will resurrect and heal into a state sufficient for the goblin to wear it as a host. This does not necessarily mean that all damaged or missing body parts will be recreated or become functional, but merely that the body will at least regenerate enough tissue to reactivate the necessary physiological processes for life. This host body is not undead, but simply newly alive.
Goblins instinctively know the basics of what their host bodies can do and what they need to survive, although they might not automatically know the fine details. A goblin wearing a turkey vulture will know that they can fly and that they hunger for carrion as surely as they know anything, but they won't automatically know what their host's average resting heart rate is or how many cells are in their body.
A goblin cannot usually stay in the same host for more than a short period of time, years or decades in the best cases, as the host body tends to develop cancer or other severe health problems due to the small but constant radiation exposure. A goblin suffers no direct danger from the death of their host body, so if they have assistance, they can wait until the host is completely used up before transitioning to the next one. However, since a long-term host generally becomes too painful or inconvenient to wear near the end of its lifespan, the goblin may wish to be transferred before then.
Goblins tend to live in communities of their own kind, if for no other reason than to make sure that someone sympathetic will be present to put them into new bodies when the time arises.
While goblins need to feed and otherwise maintain their hosts for the sake of convenience, since a body that dies with a goblin already wearing it will just become a useless corpse with a helpless, catatonic goblin lodged in its flesh, goblins do not need to do anything to keep their stony forms alive other than avoid damage. A goblin is functionally immortal, except that they can be killed by being cracked wide open or pulverized or melted or disintegrated or blasted into smithereens or what have you.
If you merely attack a hosted goblin in the generic sense, the DM should probably assume that you are attacking the host body. Killing the host body renders the goblin inert, but not dead. If you declare an attack against the goblin itself, lodged in the host's chest, then the goblin is treated as having 4 HD and an AC that is 6 points better than that of the host. In LotFP, this would mean that a goblin living in an unarmored human would have AC 18. A naked goblin is incapable of defending itself, so no roll to hit is necessary when attacking it with a melee weapon, and it has an AC that is 2 points worse than an unarmored human for purposes of ranged attacks (AC 10 in LotFP), since it's still a small target. For purposes of XP, a goblin and their host body are counted as two separate enemies, and XP is only gained from the goblin itself if it is actually killed.
Damaged goblins heal at a rate of 1 HP a year, and that's only if they are kept in a host or preserved in very safe conditions. A naked goblin lodged between two rocks in a running stream for a century would be subject to erosion, for example, and would not only fail to heal but probably take damage over time, albeit slowly. So "functionally immortal" might be overstating it a bit, but compared to a human they basically fit the bill.
So why are they called goblins?
In my current campaign, the most common host bodies for goblins are short, thin, gnarled-looking humanoids with green skin. They are part mammal and part fungus, and are remarkably resistant to radiation, although not entirely immune to it. They also tend to be born brain-dead, making them convenient for the goblins to subdue. The goblins came upon a renewable and easy-to-access source of these bodies long ago, and have generally stuck to living near this source for ages. Being rarely seen above ground nowadays, most people on the surface don't know the truth about goblin physiology, and assume that the green humanoids are the goblins. The name "goblin" is taken from a creature in halfling folklore that purportedly had a similar appearance.
If you don't like that explanation, maybe in your game the humanoid hosts of goblins are just humans and elves and such, and they tend to become green and stunted and withered-looking and traditionally goblin-esque over time due to mutations and health problems caused by the magical radiation of the goblins inside of them.
You could also ditch the whole "goblin" aspect altogether and call this creature something else, but this idea originally came about because I was planning to run a dungeon with goblins in it and I wanted to make them different from the usual D&D goblins. So I'm calling them goblins.
You could carry a naked goblin around in your inventory like any other inert object, and then implant them into a host to hopefully gain a loyal follower who is very thankful you freed them from their sorry natural state. Or you can use a particularly radiant goblin as a green candle that virtually never burns out. I bet you can think of some other item-like uses for a naked goblin, too.
Give your players a goblin and they'll take a god.
The players in my campaign made friends with the goblins in the Tomb of the Serpent Kings. Well, "friends" is a strong word, but they avoided any hostilities and engaged in some amicable enough conversation with them, at any rate. They also picked up a glowing rock early in the adventure, and later noticed that the goblins had light-up chests, like sickly Stone Protectors.
At one point, the party met a lonely goblin named Smogo who was guarding an armory. The other goblins bullied and isolated him, perhaps on account of his voice. Over several sessions, he seemed to become everyone's favorite NPC in the campaign.
After about half of the party got kidnapped by a sorcerer elsewhere in the dungeon, the remaining human fighter felt he needed a henchman to help with a rescue attempt. Meanwhile, the other goblins wanted to get rid of Smogo, so they paid the fighter to "take him off of their hands," and the fighter "befriended" him and enlisted his "help."
On the way to the sorcerer's lair, Smogo got eaten by a basilisk. His last words (or so the fighter thought) were "I TRUSTED YOOOOOOOOOOOOOU!"
On the way back from the rescue, the party saw the basilisk cough up a familiar-looking glowing green rock. If they hadn't put two and two together before, they definitely did now. Since they were on the basilisk's good side after feeding it five whole pigs and a goblin, they had no trouble retrieving the naked Smogo.
Later, the party was in the process of robbing (my slightly altered version of) the church from The God That Crawls, when they ended up ringing a gong in a back room dominated by a strange pit. Having already bound and gagged the priest (and not having any angry villagers to worry about due to a quirk of my campaign setting), they were free to observe the titular god as it sloshed into view below. They tried blowing it up with gunpowder, burning it with barrels of oil, and dropping heavy crates of books on it, all to no avail.
One of the players got the idea to use a sling and shoot one of the goblins into the god. They couldn't tell the two goblins apart, so I rolled randomly to see which one they selected. To everyone's delight, they picked Smogo.
A successful to-hit roll later, and the goblin slammed into the god's gelatinous mass at breakneck speed. It sank into the creature, which then tried to absorb it, bringing it the rest of the way into its center of mass. The entire god lit up with a brilliant emerald light, beams of green energy shooting this way and that. After a moment, the light faded to a dim spark in the middle of the monster.
A giant but familiar-looking "goblin" face formed from the creature's mass and cried to the heavens:
"I AM INTERFACED!"*
*Consider this an epilepsy warning for that link.
Smogo was first overjoyed by his new form, then mad at the fighter for getting him eaten, then grateful to him when he smoothly claimed that he only did it to give Smogo this cool new body.
So now these low-level yahoos are basically friends with the God That Crawls. Thus, they've eliminated the primary threat in the dungeon, allowing for mostly carefree looting. In this adventure in particular, I think that's a huge deal.
Look, I won't say there was absolutely no wailing and gnashing of teeth on my part. But they earned their easy victory by playing intelligently. This is the kind of thing that makes tabletop RPGs special. I'm proud of them. Besides, we all found it hilarious. That said, if you strive to be a truly neutral and fair referee, you ought to emotionally prepare yourself for these kinds of things - not just crushing total party kills, but complete over-the-top victories that "ruin" all of your carefully constructed encounters, as well. Because...fucking players, man.
Thanks are in order.
Jessica actually came up with this idea right off the top of her head when I asked her how I should make goblins weirder. I just fleshed out the details. I really don't know what I'd do without her.