Cheese Dragons are not actually alive. They are enchanted items of food that act almost identically to dragons. They have no need to eat, but they must “live” in humid environments or they will dry out and harden.

One day, a wizard was preparing a sandwich.  However, this wizard was very inept at magic, and mixed up a spell to slice cheese with a life-giving spell.  Thus was Cheddah born.  The wizard left Cheddah's egg inconspicuously at a nearby cave, where Cheddah was picked up and raised.  Cheddah doesn't mind that he is edible, though; he simply has to be careful around some dragons, who wouldn't pass up such a delicious meal.  This is the reason Cheddah often spends his time hidden and alone, venturing out only when the other dragons are asleep.  However, among certain dragons, he is open and loves to have fun, knowing they wouldn't eat him.