The Last Homely House is well behind Thorin & Company; Bilbo muses on what's going on in the Shire as they wind their way through the foothills of the Misty Mountains, and everyone is cold and properly miserable.
One thing I haven't really talked about that deserves more attention is the way Tolkien writes about geography. He simply does a wonderful job of conveying a feel of the land, of terrain, space and history, so that the reader feels they're traveling through a rich and living landscape. Tolkien excels at creating a world the reader can really feel immersed in. One particularly striking way this comes up is the way he describes the Company's ascent into the Misty Mountains. Having given us a pretty good notion of the mountains, he gives the most wonderful description of a ferocious thunderstorm raging in the mountains. The detail I remembered best from my previous readings was the stone-giants throwing boulders at each other for fun in the storm, but what I didn't remember was how vividly he describes the storm and the company's utter misery in trying to weather it. You really feel like you're there with Bilbo and the dwarves, trying to snuggle under a rock overhang amidst an awesome display of nature's power.
It's this misery that drives the story forward, as young Fili and Kili are sent to look for a better shelter. They soon return, having found a cave big enough for the party to take cover in. They do their best to take care, exploring the cave thoroughly and refraining from lighting a fire so as not to draw attention to themselves. Finally satisfied that the cave is safe, they settle down for a smoke and go to sleep.
Of course, it isn't safe. After the party falls asleep, goblins emerge from deep inside the cave and surprise the sleeping dwarves. The only bit of luck is that Bilbo was having trouble falling asleep, and his scream of terror wakes Gandalf, just in time for the goblins trying to grab him to get a nasty surprise. The dwarves, hobbit and ponies, however, are captured by the goblins and driven into their deep tunnels, the goblins singing a song that creates a wonderful onomatopoetic effect with the swish and smack of the whip cracks driving them round and round underground.
Things don't look too good for the dwarves as they're hauled into Goblin-Town's great hall and paraded before the Great Goblin himself. Thorin puts on his best pompous manner to talk to him, and they learn that the safe cave they took shelter in was, in fact, the goblins' Front Porch. They're quite understandably suspicious of a party of dwarves at their front door, and the elven sword found on Thorin clinches the case. Just as the goblins are about to put Thorin and Company to death, Gandalf makes his expected reappearance, dousing the lights, creating general chaos and introducing the Great Goblin to the sword Glamdring of Gondolin - a fatal encounter.
Quickly, the company make their getaway, the dwarves taking turns carrying poor terrified Bilbo, stopping once so that Gandalf and Thorin can ambush the pursuing goblins. This buys them some time, but stealthy goblin runners set off in pursuit instead, and as they fall on the dwarves Bilbo is knocked off Dori's back, hits his head and loses consciousness.
After the previous chapter's pit stop, this one has plenty of action and leaves us very much in the thick of things. I'd be remiss, however, if I didn't take a moment to document our first meeting with the goblins, later known as orcs. Here's the description Tolkien gives us:
Now goblins are cruel, wicked, and bad-hearted. They make no beautiful things, but they make many clever ones. They can tunnel and mine as well as any but the most skilled dwarves, when they take the trouble, though they are usually untidy and dirty. Hammers, axes, swords, daggers, pickaxes, tongs, and also instruments of torture, they make very well, or get other people to make to their design, prisoners and slaves that have to work till they die for want of air and light.
There's really no two ways about it: that's a pretty miserable account to give of an entire people, let alone a whole race. But even here, the story we're told is actually quite a bit more complicated than the Always Chaotic Evil trope: the goblins actually have no particular malice against dwarves as such, and Tolkien mentions that "wicked dwarves" have even made alliances with them. Thorin and Company are brought before the Great Goblin who interrogates them, and Thorin has a civilized, if brief, dialogue with him, quite clearly proving that they're intelligent creatures one can have a conversation with. So even these goblins aren't latter-day video game villains who can't be interacted with in any way except through violence.
Obviously this is a major question that I'll be returning to as this project gets further along, but for now, I just want to note that in our first encounter with what will pretty much become the stock Always Chaotic Evil villain of fantasy, the picture is already more complicated than it will later be seen to be.