Bilbo has three weapons available to him during combat. He begins the game with his walking stick, which can be used in melee combat, and stones, which he can throw. To use stones, he must switch to first-person view. Later in the game, he acquires a dagger, Sting. All three weapons can be powered up by finding magical scrolls scattered throughout the game. These scrolls grant such abilities as increased damage, jump attacks, double and treble combo attacks, and charged attacks. The game also features the use of the One Ring, which can temporarily turn Bilbo invisible, allowing him to avoid certain enemies.
Bilbo's health system is based upon "Courage Points". At the start of the game, he has three health points. For every 1000 Courage Points he collects, he acquires an extra health point. Courage points come in the form of diamonds, with different colors representing different numerical values. For example, a blue diamond equals one courage point, a green diamond equals ten etc. Bilbo's progress in gaining a new health point is shown in his courage meter, which is on screen at all times. For the most part, Courage Points are scattered throughout the levels and awarded for completing quests. Some of the higher value diamonds are hidden off the main path of a level, while the lowest level diamonds (blue) are often used to indicate to the player where they are supposed to be heading.
At the end of each chapter, the player is taken to a vendor, where they can spend the in-game currency, silver pennies. Items available for purchase include stones, healing potions, antidotes, skeleton keys, temporary invincibility potions, additional health points, and the ability to increase the maximum number of stones and health potions which Bilbo can carry.
Pennies, healing potions, antidotes and, often, quest items and weapon upgrades can be found in chests throughout the game. Often, chests will simply open when Bilbo touches them, but sometimes, the chests are locked, and Bilbo must pick the lock. This involves a timed minigame in which the player must align a pointer or select a specific target. Some chests will have only one minigame to complete, but chests containing more important items will have more, up to a maximum of eight. If Bilbo misses the pointer/target, the timer will jump forward; if he hits a red pointer or target, the minigame will end immediately. Penalties for failing to open a chest include losing health points or being poisoned. If the player has a skeleton key, they can bypass the minigames and open the chest immediately.
Plot
The game begins as Gandalf (voiced by Jim Ward) arrives in the Shire to invite Bilbo Baggins (Michael Beattie) on an adventure. Bilbo declines, but invites Gandalf to tea the next day. When Gandalf returns, he is accompanied by thirteen dwarves who are going on a quest to the Lonely Mountain to win back their kingdom. Led by Thorin Oakenshield (Clive Revill), they plan to reclaim their treasure from the dragon who stole it, Smaug. Gandalf tells them they will need a thief to complete their mission, and he volunteers Bilbo, who promptly faints. When he is unconscious, Bilbo dreams of the possibilities of heroism in such a quest, and upon waking, decides to join the dwarves.
On the first night of the quest, the entire company is captured by three trolls, who plan to eat them. However, Gandalf arrives, imitating the trolls' voices and causing them to fight amongst themselves until the sun rises, which turns them to stone. As Bilbo searches for supplies in their cave, he meets an injured elf, Lianna (Jennifer Hale), who he assists by finding her healing potion. He also finds a dagger, which he calls Sting. The party then move on to the Elven city of Rivendell, where Elrond tells them of a secret entrance into the Lonely Mountain. They then head to the Misty Mountains. During the night, they are attacked by goblins, and Bilbo is knocked unconscious. He awakens alone and lost. As he wanders through the underground passages, he finds a ring, and encounters a creature named Gollum (Daran Norris). Gollum makes a deal with Bilbo; they will play a game of riddles. If Gollum wins, he will eat Bilbo, but if Bilbo wins, Gollum will show him the way out. Bilbo wins the game, and Gollum says he must get something before he can lead Bilbo out. He then realizes his ring is gone. Bilbo puts the ring on and discovers it makes its wearer invisible. An infuriated Gollum runs to the exit to try to stop Bilbo leaving, unwittingly leading the invisible Bilbo out. He reunites with the dwarves and Gandalf, but the party are then attacked by a groups of goblins and wargs. They climb to the tops of the trees, and are rescued by a band of eagles, who drop them off near Mirkwood Forest.
Gandalf leaves after showing the group the path through the forest and warning them never to leave it. After several days, however, the dwarves are running low on supplies, and see a group of Wood Elves enjoying a feast. They run into the forest towards the elves, but become lost and separated. Bilbo encounters Corwin (Michael Ensign), a man from Lake-town, whose party has been killed by the Great Spiders living in the forest, and who have also taken the dwarves. Bilbo is able to rescue them, but as soon as he does so, the dwarves are captured by Wood Elves and placed in the dungeons of Thranduil, who wants to know why they are in the forest. Thorin, however, refuses to say anything, enraging Thranduil. Using the ring, Bilbo enters Thranduil's hall, where he meets Lianna. With her assistance, he is able to free the dwarves by sealing them into barrels which are sent down the river to Lake-town.
There, Bilbo becomes friends with Bard (André Sogliuzzo), captain of the town guard, and performs several tasks for him, including finding his Black Arrow, which is said to have special powers. The party then head towards the nearby Lonely Mountain. They find the secret entrance, but Bilbo is dismayed to learn the dwarves have no idea how to kill Smaug. As such, he sneaks into Smaug's lair to try to find a weak spot. Bilbo tricks Smaug (James Horan) into showing him his stomach, which is coated in diamonds, except for one small spot, where his skin is exposed. Bilbo leaves, telling the dwarves of Smaug's vulnerability, and is overheard by a nearby thrush, who heads towards Lake-town. Furious that he has been outwitted by Bilbo, Smaug bursts from the mountain and attacks Lake-town. However, the thrush tells Bard of the exposed skin, and Bard fires the Black Arrow into Smaug's chest, killing him.
