The Lord of the Rings is made up of three parts: The Fellowship of the Ring, The Two Towers, and The Return of the King.
The Prologue refers to the book, The Hobbit, and also gives detailed information about the lives of the people known as hobbits. They are described in detail, as are their living habits and their various sub-groups. The prologue lays the groundwork for the rest of the book, giving a brief history of Middle-earth and the origins of the Shire records.
As the title suggests, the book begins with a party that has been planned for quite some time. Bilbo, the hero of Tolkien's earlier book The Hobbit, is celebrating a significant milestone in his life, his 111th birthday. His cousin Frodo, whom he adopted twelve years ago, shares his birthday, which is September 22. Frodo is turning 33 (his coming of age). It seems that Bilbo adopted Frodo in order to make the younger hobbit his heir, disappointing the Sackville Bagginses, who had always wanted to live in Bilbo's home at Bag's End. Frodo's parents had died in a boating accident when he was small and he had lived with Bilbo from then on.
This year the party promises to be even grander than ever before, becoming the talk of Hobbiton. Most people admire Bilbo, but some think that it is unnatural for a person to have inexhaustible wealth as well as a prolonged life. Still, Bilbo's parties are legendary and everyone has been invited.
Though it is called a party, Bilbo considers it to be a variety of entertainment rolled into one. There are presents for everyone; the fireworks have been specially designed for Bilbo by Gandalf the wizard. There is a splendid supper for everyone, and a special dinner for a small group of special friends and relatives.
After the dinner Bilbo announces that he has three reasons for the grand party. First he cares for everyone present. Second, he wants to celebrate the birthdays of himself and his heir. Third, he wants to bid the people of his town farewell. He steps down, puts on his ring of invisibility, and disappears from the crowd.
Back at his home, Bilbo talks to Gandalf, the wizard. After much discussion, Gandalf persuades Bilbo to leave the magic ring for his protÃ©gÃ©, Frodo. Bilbo had promised to do this, but when the time comes he is reluctant. Bilbo then leaves. The next day Frodo announces that Bilbo has gone and that he will not be back. He distributes packages that Bilbo had specially made for his friends and relatives before leaving.
Tolkien's world is a magical one populated by elves, goblins, trolls and other mystical beasts. The heroes, Bilbo and Frodo, are hobbits. Bilbo has already had many adventures chronicled in a previous book, The Hobbit. The author, depending on the reader's familiarity with the Middle-earth chronicle that came before, treats Bilbo as a recognizable and likeable character with an established fan base.
This chapter serves mostly to introduce the second generation of adventures, led by Bilbo's protÃ©gÃ© Frodo. With this chapter presenting a kind of "changing-of-the-guard" scene between the two hobbits, Frodo earns some respect and admiration simply by his association with a past successful hero.
The disappearance of Bilbo is the subject of many conversations in Hobbiton. The general opinion is that Bilbo has finally gone mad and run off into the Blue. Some think that he is dead, many of whom suspect that he has been murdered by Frodo and Gandalf for his legendary gold (earned in the course of events in The Hobbit). Despite this ugly rumor, Frodo lives a long life in the community, continuing to throw Bilbo's birthday party year after year. Like Bilbo, Frodo shows what others call signs of "good preservation." He continues to live at Bag End and spend most of his time with his cousins Merry and Pippin. By the time he turns fifty, he has begun to grow restless. And the town has gone abuzz with the news of orcs and trolls and mysterious lands beyond the Shire.
About this time the wizard Gandalf appears. He tells Frodo that town is in danger because of the ring of invisibility that Bilbo has given him. Gandalf explains. The ring was forged in the volcano at Mt. Doom (or Orodruin) by the evil Sauron who wants to rule the world. The ring belonged to Gollum, a hobbit who owned the ring for a very long time until Bilbo tricked him out of it. Now Sauron and Gollum have heard that the ring is in the hands of a hobbit, and Gollum is on his way to find it.
Gandalf explains that the bearer of the ring never ages; for this reason Bilbo lived such a long life and Frodo himself has not shown signs of aging since he got the ring. Also, the ring exerts a mental power on its wearer. It is because of this power that neither Gollum nor Bilbo wanted to part with the ring when the time came. The power made Gollum evil; since Bilbo is a good man, the power does not make him evil.
Gandalf tells Frodo that if Sauron gains the ring he will be all-powerful. When Frodo hears this, he is shocked and doesn't want anything to do with the ring. Gandalf tells Frodo that it is not a simple matter of wanting or not wanting the ring; the ring chose him (Frodo). Gandalf tells Frodo that he must destroy the ring, and the only way this can be done is by throwing the ring back in the Crack of Doom in the depths of Orodruin.
Frodo decides to leave the Shire in order to protect the people of his village. Just then Gandalf catches Sam Gamgee, the gardener, eavesdropping on their conversation. Gandalf thinks Sam has ulterior motives, but it turns out he only wants to go on this adventure with Frodo, whom he admires.
This chapter provides some exposition in order to kick-start the plot. It also explains some of the unexplainable things about Bilbo, such as why he never aged and why he did not want to part with the ring.
Interestingly, Gollum had had the ring in his possession for so long he was transformed completely. Bilbo, realizing he could not let such a transformation happen to him, reluctantly parted with the ring and left to live out the rest of his natural life.