[D]warves are not heroes, but calculating folk with a great idea of the value of money; some are tricky and treacherous and pretty bad lots; some are not, but are decent enough people like Thorin and Company, if you don’t expect too much.
The dark passage into the mountain stands open before the company. Thorin nominates Bilbo, the official burglar, to go inside to snoop. Bilbo enters, slips on his ring to make himself invisible, and proceeds down the long, dark passage into Smaug’s lair. There, he sees the magnificent, terrible dragon asleep on piles of treasure. Smaug is red and gold, with fiery breath, sharp claws, and a hide as strong as a diamond. Bilbo is horribly afraid, but he works up the nerve to take a single golden cup from one of the piles. He then rushes back up to the dwarves, who marvel over the cup.
Bilbo’s theft does not go unnoticed by Smaug, who takes careful account of his treasure. When he awakens, he is enraged to discover that the cup is missing. He flies around the mountain breathing blasts of flame, and when he sees the company’s ponies at the foot of the mountain, he chases the ponies down and devours them. Meanwhile, the dwarves and Bilbo huddle inside the secret passage, terrified. After a while, Smaug returns to his den and falls asleep. The hobbit works up the nerve to return to the dragon’s lair, only to discover that the dragon has been feigning sleep. The terrible creature is wide awake, and Smaug is waiting for Bilbo.
Although he cannot see Bilbo because of the ring, Smaug smells Bilbo and greets him mockingly. Bilbo is smart, though, and answers Smaug only in riddles, which amuses the dragon enough to quell his anger for a while. Cleverly, the hobbit flatters Smaug into displaying his thick-skinned underbelly, revealing an open patch in Smaug’s scaly armor above his left breast.
Bilbo rushes back up the passage, just outrunning the dragon’s angry flames. The hobbit tells the dwarves all that he has learned while a thrush sits nearby and seems to listen. They then hear the roar of the dragon once more and shut the door to the passage just before an avalanche comes down upon it. They are trapped inside the mountain.
Smaug guesses from Bilbo’s riddles that the company is somehow involved with the men of Lake Town, so he flies there to wreak vengeance. The hobbit and dwarves cower in the dark passage until they can bear it no longer. They slowly creep down toward Smaug’s chamber. When Bilbo determines that the beast is gone, the dwarves run out to the treasure in glee, remembering the prosperous times of old. Bilbo takes only a few things. One of them is the Arkenstone, an incomparable gem that Thorin seeks but which the hobbit decides to keep for himself. Bilbo also finds a marvelous coat of mail made of mithril, a wonderfully strong, light metal that is scarcer and more valuable than silver or gold.
After the excitement has died down, Thorin leads the company through the passages of the mountain and out the main gate at the source of the River Running. They still have no idea what to do about Smaug when he returns. In the meantime, they are desperately hungry, so they follow the river down from the mountain to an old guard-post cavern that has not been used since the days of Thror, Thorin’s grandfather. There, they rest, eat, and wonder where the dragon has gone.