Short answers, pulled from the story.
Hobbits are a fictional race presented by Tolkien as a variety of humanity, or close relatives of humans. They stand between two and four feet tall, live barefooted in underground homes called smials built into hillsides, and are depicted as fond of simple, unadventurous lives of farming, eating, and socializing.
Tolkien admitted that Sinclair Lewis's 1922 novel Babbitt was one influence, and a letter to W. H. Auden credits Edward Wyke Smith's 1927 children's book The Marvellous Land of Snergs as a probable unconscious inspiration. Tolkien also constructed a fictional Old English etymology from holbytla, meaning hole-builder.
Hobbits first appeared in the 1937 children's novel The Hobbit, whose protagonist is Bilbo Baggins. Tolkien wrote the famous opening line on a blank piece of paper while grading student exams, around 1930 or 1931.
Tolkien devised three types: Harfoots, the most numerous, smallest, and most typical; Fallohides, the rarest, generally fair-haired, taller and slimmer, with closer ties to Elves; and Stoors, the stockiest, the only hobbits who could grow beards, and the only ones who used boats and swam.
Dungeons and Dragons adopted the term halfling as a legal alternative to hobbit. Fantasy authors including Terry Brooks, Jack Vance, and Clifford D. Simak also use races of halflings in their own works.
Skeletal remains discovered on the Indonesian island of Flores in 2004 were informally dubbed Hobbits by their discoverers in articles published in the scientific journal Nature. Homo floresiensis, like Tolkien's hobbits, grew no larger than a three-year-old modern child and had proportionately larger feet than modern humans.