Thorin announces that the time has come for Bilbo to earn his reward. Alone, Bilbo enters the tunnel that leads to the dragon's lair far beneath the Lonely Mountain. At the tunnel's end, Bilbo sees Smaug for the first time, lying atop his huge heap of treasure. The beast is sleeping. Bilbo steals a cup and returns to the dwarves, who are excited by his accomplishment. When Smaug awakes, however, he misses that cup, and he shakes the roots of the Mountain in his fiery rage. Smaug flies forth from the Mountain, breathing fire on it and the surrounding area. The dwarves and Bilbo take shelter within the entrance to the tunnel until Smaug returns to his lair. Thorin and the others even blame Bilbo for disturbing the dragon. The hobbit, however, defends his actions, pointing out that he could not steal all of the treasure all at once, and that the dwarves have made no plans of their own for dispatching Smaug. The dwarves apologize. Bilbo has "become the real leader in their adventure."
Bilbo returns to Smaug's lair, with a plan of his own. He puts on the Ring and engages Smaug in a conversation full of riddles. Smaug smells but cannot see his visitor. Despite this fact, he is vain enough to be willing to show off his jewel-encrusted underbelly to Bilbo. The hobbit spies a bare patch where the dragon would be vulnerable. He leaves, but not before making one last teasing comment, which again infuriates Smaug. Back on the "doorstep," Bilbo tells the dwarves what he has learned. He throws a rock at the thrush, who appears to be listening, but Thorin tells him that the thrush is from an ancient and magic race of birds which Men used to use for carrying messages. Then the dwarves fall to dreaming about what they will do once they have recovered their treasure. Thorin is especially interested in finding the Arkenstone, the fairest and largest gem of all delved by the dwarves. Eventually, Smaug again emerges, angered and eager to remind the world "who is the real King under the Mountain!"
Readers see further development of Bilbo's character. The narrator tells us, "Already [Bilbo] was a very different hobbit from the one that had run out without a pocket-handkerchief from Bag-End long ago." Bilbo's bravery in going into the Mountain alone is called "the real battle"-and, indeed, in the mythic pattern of the hero's journey, many exterior battles serve to mirror interior ones, the struggles of the soul to realize its identity. As in real life, the worst enemies of heroes in fiction are sometimes not other characters, but the heroes themselves. Note that in The Lord of the Rings, Frodo will at several points, albeit to a much greater degree, experience the "battle" Bilbo does, the conflict between a desire to press on and a desire to abandon the quest. Continuing the quest for identity, Tolkien seems to be saying, let alone seeing it through to a successful conclusion, requires courage-the facing, as it were, of our own "inner dragons."
Readers may also note how carefully Tolkien has plotted to this point, preparing Bilbo for his confrontation with Smaug. For example, his riddling with the dragon hearkens back to his riddle contest with Gollum. His misdirection through conversation in order to gain a desired end-in this case, information about Smagu's possible weaknesses-echoes Gandalf's similar use of conversation with Beorn. Both by learning from his own experiences and by observing others, Bilbo is able to rise to this occasion and become a hero. The same processes, of course, hold true in our own lives: we learn from others and from experience.
In regards to conversation, readers may finally wish to pay attention to the role of conversation and language in The Hobbit. Bilbo's plan of playing at riddles with Smaug almost backfires on him; as the narrator says, "the effect that dragon-talk has on the inexperienced" is to overwhelm and confuse. Further, Bilbo fears he may have revealed too much information about the expedition in his conversation with Smaug. How else is language used-both responsibly and irresponsibly, for good and for ill-in the book? How do readers use language and conversation in their own lives?
The Hobbit: Novel Summary: Chapter 12