Based on JRR Tolkien's novel of the same name, The Hobbit is the story of Bilbo Baggins, who is seen in the Lord of the Rings trilogy.  

The Hobbit follows Bilbo as he first encounters Gandalf. He is somewhat unwillingly swept off on an adventure to the lonely mountain to rid it of the dragon, Smaug. The dragon is guarding a treasure of enormous value that it had taken from the dwarfs who once lived there. A major battle ensues shortly.

Ever since Peter Jackson’s Lord of the Rings movies there had been talk about filming The Hobbit, basically a lighter in tone prequel of sorts to Tolkien’s epic Rings trilogy more or less featuring the same characters.

However the filming rights resided at New Line (the studio that produced the first three films) and relations between them and Kiwi director Peter Jackson soured over the alleged non-payment of royalties. At one point New Line let drop that they’ll make a Hobbit movie without Jackson, which led to an online ruckus by Tolkien fans who insisted that they won’t bother going to see any movies in which Jackson wasn’t involved.

The legal dispute has been settled though and plans are now going ahead to make two films out of The Hobbit novel.

Jackson won’t be directing, but he will be executive producer. (His wife and producing partner Fran Walsh has also signed on.)

Instead Tolkien fans sighed a collective sigh of relief when it was announced that the talented Guillermo del Toro of Pan's Labyrinth and Hellboy fame will be directing the two movies.

Some stars of the original Lord of the Rings films have already expressed interest in reprising their roles, but it is as yet unknown who exactly will be signing on to appear in The Hobbit.