Source of Magic

[Eönwë]

I would say that in the case of the Maiar, it is just them sort of "twisting" reality. In each case, they are not doing anything impossible, they are just making it occur then. They are not actually doing anything outside the general "creation" of Arda, but are rather manipulating it in the way they want. Fire happens anyway, and Gandalf is just making the fire come, but it is a natural occurrence, he is just giving it a push. This is probably because, as many people have said, he knows the origin of fire, he sang in the Song. With all of the magic, nothing "impossible" happens, it is just that they are causing it to happen prematurely.

It's probably the same with the elves and their "magical camouflage" cloaks. After all those thousands of years, they probably know trees and other natural features well enough to incorporate their appearance into the cloaks.

And as for the swords and stuff, what about technology? I'm sure Aule taught the Noldor and the Dwarves a lot.