It begins right before the Lord of the Rings, with and elder Bilbo Baggins (Ian Holm) throwing a party at his house in the shire. Frodo (Elijah Wood) makes an appearance. Bibo then begins writing down his adventure of how he found the Ring...
The younger Bilbo (Martin Freeman) is at home when dwarves start appearing at his house. Gandalf, the wizard, had told them to go there. This includes legendary warrior Thorin Oakenshield. But why Bilbo? Because Hobbits can get into places where other beings can't--and they need Bilbo to help them. There's a lengthy flashback scene about the Dwarf Kingdom of Erebor, which explains that it was invaded by Orcs and then a dragon. They want to reclaim it--but it's a long journey. Along the way they are almost killed by massive trolls, barely escape the horrors of the goblin tunnels an there's an albino Orc that has a score to settle with Thorin. And Bilbo first meets the creature that will change his life--Gollum, who dwells at the shores of an underground lake. Bilbo takes his ring, which saves his life.
I enjoyed this movie. Think of it as "Lord of the Rings Lite".