In a hole in the ground there lived a Hobbit. . .

I mean, it's going to be hard to write a response of The Hobbit. It's such an icon and I feel almost all that is to be said of The Hobbit has been said (Or turned into a trilogy of movies by Peter Jackson).

I think The Hobbit is one of the epitomes of the genre of fantasy for children, it also perfectly illustrates Joseph's Campbell's "Hero's Journey".
Essentially, the book begins with poor Bilbo Baggins who doesn't want to leave the comfort of his home despite Gandalf the Grey proposing an adventure for him to do so. Bilbo is more or less cast out from his home and forced to go on this adventure into the unknown. Of course Bilbo follows the rest of the "Hero's Journey" (Trials, tribulations, Death, Abyss, etc.) and eventually comes to his conclusion. What really made The Hobbit special was it's incredibly powerful storyline but also in compilation with the worldbuilding that occurs. Tolkien's world in The Hobbit is so incredibly described that it has inspired many other works of fantasy (E.g. Jim Hensen's The Dark Crystal).

It's hard to really go into detail on the monumental impact Tolkien's book has had on the genre of fantasy, but I highly recommend reading The Hobbit and the rest of his works. (And if not, at least try sitting through the movies)