The Gnomes lacked the PIPs to safely fall back into the safety of the village, so shook out into a line.
Their first volley eliminated one element of Elven riders. Some spears moved up to the support the missile troops.
In fact the whole Gnome army shifted to the left, leaving the Elven mounted horribly exposed but with the option of a rapid withdrawal if things went really badly for them. The Elves moved their magician up in support, as their hero cut down an element of shooters.