Well both Ian Mckellan, Peter jackson and my Middle Earth dictionary say he is a demi-god. He's the same thing as the Balrog, only he is good instead of evil. Gandalf, Saruman and the weilders of the flame of ar-nul chose to take benevolent human forms to show humility. The balrog being a servant of the flame of Udin and the others like him (aprently there was a time when the skies were filled with balrogs) chose more menacing forms to match their dark and arrogant wills.

What little we lern of Gandalfs past in the books is just Frodo musing on how or when Gandalf might of stolen into the world, he thought it hard to imagine Gandalf ever as a young boy, and it seemed he had been old all his life. Which is kinda cool.