What Tolkien was really writing was not so much a story as a myth, which is why he fills the whole thing with archetypes rather than individual personalities. He once said himself that he set out to create for the English a body of legends to rival those of the Greek and Norse myths - and that's just what he did. It's why his work echoes so strongly for us, and why he has such enduring popularity here in England.
The Hobbits represent the ordinary people of England, and it is they who do the really hard and dangerous work - and ultimately they who save the world not only for themselves but for the kings and mages and heroes.
In LOTR Tolkien's characters are shallow, his plotting straightforward and his villains uninteresting - but every time we have any kind of book poll here in England LoTR wins the 'Best Ever Book' category by a very wide margin because the book speaks to us on levels no other work does.
I can't really explain the appeal better than that, I'm afraid <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />