The correct and more common phrase is: "There are fewer people." "Fewer" is used when referring to countable nouns, such as "people," and it indicates a smaller number in quantity. So, when you want to compare the number of individual people, you use "fewer." "There are less people" and "There is less people" are both incorrect because "less" is used for uncountable nouns, such as "water" or "sand," when referring to a smaller amount or quantity. In summary, the correct form is "There are fewer people," and it is the more common usage when talking about a smaller number of individuals.

I think I agree with the other Dan I would say: 1. is correct 2. is incorrect because people are countable (i think), but people might say it anyway. 3. is incorrect because 'people' is plural.

#3 is definitely incorrect. "People" is a plural noun, even though it doesn't end in "s" and isn't formed from a singular word. You need to use the form "people are," not "people is." #1 and #2 are interesting. This is a point of word usage that people argue about. The traditional rule is that you use "fewer" for countable nouns, "less" for uncountable or mass nouns. For example, "nickels" are U.S. coins worth five cents. If I have five nickels and you have six nickels, then a) I have fewer coins b) I have less money. By that rule, #1 is correct, and #2 is not. As far as I know, the traditional rule is "safe." Everybody agrees that it is correct. So as an English learner, you should practice, learn and use #1. It is common, it is used, and it is understood in ordinary informal conversation as well as in careful written English. In everyday speech, though, "less" is often used with countable nouns. It is very hard to come up with any explanation or rule about what situations this occurs in. You can't say "it's MORE common." But, for example, until quite recently the signs in supermarket express lines almost always said "EXPRESS LINE--12 ITEMS OR LESS." In the past decade apparently people started complaining about the "bad English" and now you do see "12 ITEMS OR FEWER."