Lilties, from Final Fantasy Crystal Chronicles, are, like 3 feet tall, on average, but they're the warrior race that used to rule the entire world. They were The Empire (the most adorable empire ever, but still). In fact, they're sort of still in power, since the princess is half-Lilty (yeah, they can breed with humans, which is a little... squick)
Conversely (and an inversion), Yukes, the tallest and most intimidating race, are the magical race, with little direct combat capabilities and, some say, no real bodies to speak of at all. Yes, they all wear armor and their weapon of choice is a hammer. But they couldn't wield it to save their lives.
Speaking of Final Fantasy: what about the Moogles? Granted, they do not fight often, but when they do... 4 feet tall, 94 pounds, and apparently above dragons in the food chain.
That would be the standard and Crystal Chronicles moogle. TheIvalicebreed, on the other hand, is a different beast. Most Moogle classes provide crazy-ass support (Animists can heal one person completely while Jugglers have nasty debuffs), but the Moogle Knight can stand firm alongside any Hume or Bangaa, and if one of them decides to take up marksmanship, your best bet is to run as fast as you can in the opposite direction and never stop while there is breath in your body.
Final Fantasy XI brings us the Tarutaru race. They come up to your knees, and are just as capable of thrashing monsters as any other race.
Final Fantasy VII's Cloud Strife is 5'7" according to the English translation, though given that he's 173cm in Japanese, he's closer to 5'8". Roughly average in America, but he's the shortest human adult male in the party, and quite possibly the entire cast. He's also the strongest member of the cast save for Sephiroth.
Dissidia: Final Fantasy brings together the main series' heroes to kick ass and take names, and prominent among the name-takers and ass-kickers is Zidane. The toony, chibi-fied art style of his original game is now finally translated to something a little more realistic, and, well—it turns out that it wasn't just the chibi-style, the kid has yet to clear five feet. This does not stop him from thrashing characters literally twice his height and probably many times his weight. A similar thing applies to the Onion Knight—the people who make a big deal over tiers may place him near the bottom, and who knows, they might be right—but a computer-controlled OK has the best average AI of any character in the game, according to the Word of God, and puts it to frightening good use.
Mazzy Fentan of Baldur's Gate II - a 4 ft. tall lady knight who is one of the best melee fighters in the game and will rip through foes many times her size.
King Mickey in Kingdom Hearts. Some fans of the game would dearly love a Smash Bros. style game so he and Yoda could have a match.
The protagonists Ventus, Xion, Roxas, and Sora all count, the latter three moreso, and Sora especially. Judging by presentation alone, Sora is not only powerful, but balls-out crazy in his application of said power, despite being 15 years old and short.
Any child variant of Link counts, but special mention goes to Toon Link.
Credit has to go to Midna. An imp, about half the size of Link, stops a charging Ganon and then flicks him across the room. With her hair!
The Poison Headcrabs from Half-Life 2 deplete your heath to one hit-point with a single bite. This is less due to the strength of their jaws and more the strength of their namesake poison, however.
In fact, they do no damage themselves. You could be chewed on by a dozen poison headcrabs for a straight hour and be perfectly fine. The poison even eventually wears off and you will back at the same amount of health you had before you were bitten. The real reason they are so dangerous is that they allow other enemies in the area to cause a Critical Existence Failure very easily.
A metagame example from World of Warcraft. Smaller character models are harder to select and thus attack. Of the player races, this means the very tiny Gnomes are particular nuisances. And since Gnomes can be both Warriors and Death Knights, they can also be stupidly powerful and durable. Goblins, who were added in the Cataclysm expansion, are much the same. Dwarves aren't nearly as small, but are still pretty shrimpy, and can be Warriors, Paladins, and Death Knights - all the main tanking classes besides Druid.
That said, once the aforementioned expansion hits the only race that will have all of the tanking classes available to them are the typically 8 foot tall Tauren.
The Goblins are Gnome-sized greenskinned creatures who are pretty strong for their size. And insane to boot.
Suika Ibuki of the Touhou has the appearance of an 8-year old girl, yet is physically the strongest character of all. And that's before she uses her power of density manipulation to grow several times her size...
Cirno is one of the smallest named character in the games, being a child fairy. But even though her incompetence, stupidity and supposed "weakness" are legendary, none of the named Touhou characters are to be trifled with. Cirno holds her own against some of the powerhouses of Touhou in Hisoutensoku and in Fairy Wars is strong enough to give trouble to MarisaKirisame.
There's also Shinmyoumaru Sukuna, who is probably the smallest character in the series due to being based on Issun-boshi and usually only being about the size of a mouse, yet she's a Final Boss and was able to use her Miracle Mallet to make herself the size of a child. And she still manages to put up a fight.
While not as much as in the anime, the Pokémon video games tend to have more than a fair share of smaller creatures overpowering significantly larger ones. Mew weighs in at a little under 9 pounds and a foot tall and Shaymin is only slightly larger, but both have base stats well above average even among Legendary Pokémon.
Don't forget Azelf. Tiny, light, very high Special Attack. Its physical Attack power is just as high.
Celebi, Jirachi, Manaphy, Victini and Meloetta deserve a mention.
If a Shuckle uses Power Trick, it becomes the most powerful attacker in the entire series, period. It's two feet tall. It's a shame that Power Trick Shuckle is for the most part an unreliable strategy...
Excadrill is so ridiculously overpowered that many competitive formats ban it... and it's not even a legendary! It has a large base 135 Attack stat that can be bolstered by a Swords Dance, and an ability that doubles its Speed, making it the fastest Pokémon in the entire series in a sandstorm. Its height? About 28 inches.
This trope is referenced at the beginning of Pokémon Black and White. You and your best friends get your starters, which were delivered to your house to be picked up. Since they're only level 5 Pokemon and still pretty small and cute, Bianca suggests having a Pokemon battle in your bedroom, assuming such cute little things couldn't possibly do much damage. Cut to after your battle with her and the cute little Pokemon have pretty much made the room a disaster area. This trope is promptly lampshaded by all present, including your mother who just saw the aftermath (though she's not too upset about it), no matter how little an adorable a Pokemon is, it's still a powerhouse.
Mega Mewtwo Y is a shining example of this. It is slightly smaller than regular Mewtwo (at 4'11" from 6'07"). How strong is it? Well, it has the highest Special Attack of all Pokémon out of 720 other competitors AND it (along with Mega Mewtwo X) has a BST of 780. Higher than Arceus.
Sonic the Hedgehog has a number of these. Most of the non-human characters are slightly built, a little on the short side, have noodle arms, and are very strong. Knuckles especially. And any of the flying characters (Cream can carry Big the Cat, Charmy the Bee can carry Vector the Crocodile).
Tails deserves special mention - he's 44 pounds (most of which seems to be his tails, which are each about the same size as the rest of him), and can beat up a giant robot with little trouble and no weapons. Repeatedly. He can also punch through solid rock.
Classic Sonic. He can tunnel through solid rock, and he eats big, strong, fast things for breakfast. No giant battlemechs lived to talk about him, and the aforementioned Knuckles got thrashed.
Don't forget Shadow. In the games, he can flip over a bus with one hand, and when he takes his limiters off in the anime he's quite able to take out a fleet of metarex with a single punch.
A good number of characters in Disgaea are one of these. Laharl, for example, is a stick-thin, 4'3" thirteen-year-old capable of curbstomping a starfleet.
Little Mac from Punch-Out!!, taking on boxers twice his size and definitely out of his weight rank like it's nothing.
Saber in Fate/stay night isn't even five feet tall and is built like a twig - despite saying she's too muscular, yeah right - yet she's the 'strongest' hero in the Fifth Holy Grail War. Even while only partially powered against the next strongest, Berserker, she's still capable of holding her own. With Rin as her master, she's described as being absolutely invincible. Also subverted somewhat in that Berserker isn't using magic to buff himself like she does and like he should, but Ilya won't let him. Archer also manages a tie against her despite being very weakened, despite her being 'invincible.' Strength isn't everything, Saber!
Without her magical energy, Saber is very frail; maybe even Sakura has more physical strength since no one is smaller than tiny old Saber.
Aside from being strong Saber is also fast enough and skilled enough with the sword to win against Sasaki Kojirou so her failure to defeat Archer (who fell to his knees unable to stand while parrying overhead blow from her sword) came more from emotional reasons than anything else.
Jak himself fits as well. According to his stats in Jak X he is 5'8" in Jak II: Renegade, which definitely seems average... until you compare him with the other characters, that is, and realise he is only at about chin height with most of them. And of course, those are only the humans.
Jubei from BlazBlue is a 123cm "tall" two-tailed cat-man weighing in at 25kg... He's also arguably the strongest living being in the world. In Iron Tager's story mode, Jubei effortlessly catches one of Tager's punches, just for starters.
Also, MakotoNanaya, who is only a small girl of about 5'4 and weighs about 108lbs, but is capable of punching a massive crater into the ground, outrunning CarlClover while carrying an injured Tsubaki over her shoulder and sending people flying with her punches.
Emilia, of Blaze Union. She is eleven years old, just barely four feet tall, and is a stupidly powerfulBlood Knight who is capable of turning a one-sided battle in her enemies' favor into a complete rout... the first time she ever picks up a weapon. And that's not even getting into her Superpowered Evil Side. At that given point in time, she is essentially the most powerful person in the world—Gulcasa would be stronger than this if he ever lost control of his demon blood, but he never does.
Mario. He's 5'1" (Unless you go by the crossovers, where he's about 3'1"), chubby, with no visible muscles, but he can lift a castle and throw it to the side without breaking a sweat.
In Super Mario Galaxy 2, there is a Gearmo (which is about half the size of Mario) that can destroy Chomps with one punch.
Max is about three feet tall, but is incredibly dangerous. Hell, he once tore apart a demon in hell...with his bare hands!
Chrono Cross gives us Marcie at first. Age? 9. Occupation? Bratty half-pine killer of thousands as an elite of the Acacian military, one of the four Devas. Max strength of 86 on her own. For reference, Serge (that's you) maxes out at 88. Her coworkers Zoah and Karsh hit 90. But the worst offender? Leah. Age? 6. Occupation? Abandoned child in the wilderness. Max strength? 93. Max HP? 999. Both highest without any outside help.
Considering that Leah is implied to be Ayla's mother...
Utha from Dragon Age: Origins – Awakening is a female dwarf Grey Warden who has taken the vow of silence and has been corrupted with the Darkspawn taint. She has since joined the Architect in his quest. Unlike the other Grey Wardens, she does not like to use weapons and is, in fact, a master of unarmed combat.
Merrill in Dragon Age II is a young elvish woman, definitely the smallest member of the main cast (Varric may be a bit shorter, but Merrill is a lot thinner), and capable of unleashing a horrendous firestorm of offensive magic.
Everything in their universe absolutely dwarfs both Ratchet & Clank. Clank is especially noticeable, since he plays the part of Awesome Backpack most of the time. Ratchet is, supposedly, 5'1. Not too short by our standards, but almost everyone towers over him in-universe... even his fellow lombax, Alister Azimuth. This becomes even more puzzling when you see him in Playstation Move Heroes, where he doesn't even come up to Jak's shoulder. Jak, for the record, is in the running for shortest human(ish) character in his own series. As to the 'powerhouse' part of the trope? Ratchet is a one lombax army with an unbelievable arsenal of BFGs, and Clank's a robotic secret agent with loose control over time (depending on the game). You do the math.
League of Legends has a lot of characters fitting this trope, most notably Veigar, the Tiny Master of Evil. One of the smallest champions with the ability to dish out some of the highest damage in the game and the ability to stun an entire team. Similar things can be said for the likes of Fizz the Tidal Trickster, Kennen the Heart of the Tempest and Teemo the Swift Scout, all of whom are as short as Veigar but capable of wrecking even the largest foes. Averted with Rumble the Mechanized Menace, who is even smaller than the previously mentioned characters but runs around in a (by the standards of his race) large mecha.
Really any of the Yordle champions qualify. Veigar, as noted above, may be the absolute best example of this since he has no limit to the amount of ability power he can have. A fed and farmed Veigar can destroy even the tankiest of champions with a single combo.
If you play a Bounty Hunter in Star Wars: The Old Republic you eventually get a tanking companion named Blizz. Blizz is a Jawa, one of those little hooded guys from A New Hope, that wields a rocket launcher.
In Darkstalkers, B.B. Hood is only 4'8'', and yet she's just as lethal as any other fighter in a game where some are over seven feet (or even eight feet) tall.
Mini Robot Wars has the appropriately-named Minirobots. They're half as large as a standard enemy unit... and can put some serious hurt on the invading Machines. The tagline for the game even includes the phrase "Size Doesn't Matter!"
Xenoblade has Riki, a Nopon. One of his catchphrases is "Riki can win by himself!", and he's not all talk, far from it! He has the most HP out of all the members of the party, and with the proper strategy he can solo bosses.
Can be deliberately invoked in The Elder Scrolls V: Skyrim during character creation; make either a male Bosmer (who are a full head shorter than female Bosmer and barely come up to most people's shoulders) or a female Breton (the smallest "human" race) with as little weight as possible, and then build them to use heavy armor and two-handed weapons. It can be quite amusing to watch this tiny person in full plate armor charging around with a battleaxe taller than they are, especially in Skyrim, home of the massive, muscular Nords.
Relatively speaking, the Scout of Team Fortress 2. He is the youngest and the second-shortest member of the team (the shortest being the Engineer), but is as good a fighter as any of them.
The Mutant Midget Psychos and Shotgut Midgets from Borderlands can do some damage if you let them gang up on you. One of the mini-bosses is a fairly tough midget-type enemy named King Wee-wee.
Salvador the Gunzerker from Borderlands 2 is only 5'4", but he's incredibly muscular, strong enough to use two guns at once when using his Action Skill, whether they're pistols, shotguns, sniper rifles, or even rocket launchers. He has several skills that boost his melee prowess, including one that gives him the ability to throw a devastating Megaton Punch. In the Tiny Tina DLC, he's even the template for the dwarves in Tina's RPG campaign, something that he thinks is awesome.
Gaige the Mechromancer is slightly (less than an inch) shorter than Salvador, and has a cybernetic left arm that can crush concrete.
Also, the boss of the early side-quest "Symbiosis" is a psycho midget riding a four-armed gorilla creature called a bullymong.
Midget/Runty Rats are some of the most annoying enemies in the second game. They're even smaller than regular midgets (and thus harder to hit), much more mobile, and their guns can drop you in seconds.
Sandman, the midget pirate captain from the Captain Scarlett and her Pirate's Booty DLC, is essentially a Runty Rat with a badass' health and shields. Yikes.
From Rune Factory 3, protagonist Micah in his wooly form. Woolies are the weakest, least-aggressive monsters in the Rune Factory series (Basically their version of sheep). Wooly Micah can bounce around monsters ten times his size, bare-handed.
In Mousehunt, every one of your opponents is a mouse crossed with Ninja Pirate Zombie Robot. Many of them are capable of easily outdoing the very best of your traps, such as the Acolyte Mouse, Dragon Mouse, Silth Mouse, Warmonger Mouse, Balack the Banished, etc.
In mouse standards, the Nerg Chieftain fits here. He's the smallest mouse in the Nerg tribe, and most difficult to catch.
Some of the Maverick bosses in the Mega Man X series are smaller than X, Zero and Axl, but are capable of dishing out lots of pain. Special mention goes to Gravity Antonion from X8, who, besides being a Gravity Master, can also carry a block that's four times his size and throw it at the player!
Chun-Li is called "The First Lady of Fighting Games" among fans of the genre; her official stats list her as 5'6". Compared to most other fighters in the franchise, she's almost petite.
She still has Cammy beat by two inches, however, and the Trope certainly applies to her too.