The Hobbit is a book by J. R. R. Tolkien, his first published work in the Middle-earth universe. It tells about the adventures of Bilbo Baggins, and how he came to possess a curious Ring. Generally, it was written as a children's book, and so containing a somewhat lesser amount of "facts"; it serves as a good introduction to the ring-universe. Since the story contained in The Hobbit also takes places chronologically before the one contained in LotR, that would indeed be the wiser decision.
Already the first pages introduce prominent characters such as Gandalf, the thirteen dwarves (brothers Dwalin and Balin, Kíli and Fíli, Dori, Nori, Ori, Oin and Glóin, Bifur, Bofur, Bombur, and their leader, the renowned Thorin). Many of these live yet today and are found throughout the Middle-earth, as depicted in Lotro.
This throng of fourteen, Gandalf excluded, set out for an adventure that forever changed Bilbo's, until then peaceful but limited, life. A Ring was found, sought after by forces of much darker depths than Smaug, the fire-dragon, constituted. Acquaintances were made lasting for hundreds of years until today, such as Elrond and Beorn, but also creatures Bilbo wish he never met and which yet today haunt the domains of the Middle-earth. Indeed The Hobbit makes a great background for today's virtual world of Lotro as we know it.