Hmm.. I'm not sure I have this double quote-thing down yet.. why aren't they showing up? Oh, well. There were so many good posts here that I wanted to comment on, but I'll just take it from memory instead. Great thread! I am a huge Tolkien-fan.
J.R.R. Tolkien wrote The Lord of The Rings to create a mythical world belonging to Anglian culture, since he felt there was need for one. He sent each finished chapter to his son who was at the time stationed in a military base (I forget where), and the story was original for his son's amusement, plus to satisfy his own obsessions with myths and languages. It was not meant to be published when he started it.
I believe the first thing he started writing about Middle-Earth was The Hobbit, during a boring sitting in on an English Exam (Tolkien was an English professor). He found a blank sheet infront of him, and started scribbling: 'In a hole in the ground, there lived a Hobbit'.. and thus Bilbo Baggins was born.
From what I've read from various biographies, J.R.R. Tolkien's true heartchild was The Silmarillion, because that is where he collected his mythological tales, which explains a lot about the world of Middle-Earth. However, publishers were not interested in that, and wanted to print The Lord Of The Rings instead. The Silmarillion was not published until much later, to Tolkien's disappointment. Tolkien wrote The Lord Of The Rings as one thick book of chapters, and it was the publishers who forced him to make three books out of it, as they did not have the resources to print it as one volume back then. This is why today, even if we now know it as three separate books, you can buy a thick one-volume version of it, finally granting Tolkien his wish.
Tolkien took inspiration from a lot of Northern European myths, as well as Celtic ones. If you are interested, read the Ancient Norse poem Voluspaa (a rather long, but fun description of the Vikings' view of the creation and destruction of the world). You can find creatures and names in there that you will recognise from The Hobbit: Durin, Balin, among other Dwarven names, as well as Gandalf. The ancient Finnish poetry collection Kalevala is another great inspiration of his. You can find a lot of comparison between Finnish myths and linguistics and the culture of the Ents, including their love for long words.
I agree with those of you who praise Peter Jackson et al's film production. I think the reason they manage to create such a truthful filmversion of that difficult, difficult tale, was that they were all wonderfully obsessed with the original works. One of you pointed out that some of the actors wrote biographies on Tolkien, and I'm not surprised at this. I think, even if he did not believe it could be done, that Tolkien would have truly appreciated these films. They are a tribute to his work, despite the impossible task of putting literary achievements (e.g. Tolkien's obsession with words) onto screen.
*inhales*
All the above is written from my memory of reading various biographies, and may be full of faults. Feel free to correct me or add to my fact-spilling.