This all happened a long time ago. Bill was a little fella, sneaky. And he was hired, by an old fella and some other guys to do a sneaky job. There was a treasure, guarded by a dangerous critter, and they needed a sneaky little guy to go in and get it for them. Bill managed to pick up a precious little token for himself along the way. That’s how these things go.
Bill held onto his treasure for another sixty year or so, until he was ready to pass it on to his nephew, who did not know what he was in for. The old fella (even older now) came back around and convinced the nephew that the precious little treasure was quite dangerous and he should get rid of it. And so the younger Mr. Baggins took himself on a quest, with a fellowship of travelling companions, some other little guys, some not so little guys, to drop the precious back into the volcano from whence it came.