The closest you get to a full answer is from the last living
Dwemer, Yagrum Bagarn who can be found in The Elder Scrolls III:
Morrowind. After you give him a few Dwemer books, he concludes that
the Dwemer chief architect Kagrenac somehow tied the Dwemer race's
very essence to the Heart of Lorkhan, said to be the very heart of
the god who created the world The Elder Scrolls takes place on.
During a battle against the Chimer, who moved to wipe out the
Dwemer forever, Kagrenac tried to use his 'profane tools',
Wraithguard, Keening and Sunder, on the heart, to animate a giant
brass golem as a new god, Numidium. What happened was
simulataneously, every Dwemer simply vanished from the face of
Nirn, except Bagarn, who claims he was in 'the outer realms' at the
time.
Whether the Dwemer were annihilated, or ascended, has not been
revealed.