OP, you could read some runestone. Greys were vile humanoids or humans in their former life, who are reborn in Valheim as a punishment, or simply because they can't find salvation (akin to ghosts or golems then). Their vile soul impregnate and animate the earth, moss and wood, and we get these vegetal abominations.

Originally posted by Optimus Prime:

When the soul of a murderer or a great sinner rots under the ground. so yeah murderers rapists thieves I kill everyone I see.

Perhaps their existence is an eternal sufferring, and perhaps they don't even have memories of their former life, on top of being subjugated by the Elder. This could explain why undeads chase them (in case they belonged to the same people before death).