Good but not great movie. It was very long at 2 hours and 50 minutes. This wasn't a bad thing since I needed my LOTR universe fix, but there were several times were I thought "This must be the ending" only to see it continue on. Bilbo is MUCH more relate-able and entertaining than Frodo. I thought that was a weakness of the first movies with their boring, slightly homosexual Frodo/Sam scenes, so it's good to see a better Hobbit lead. The tone of the movie is much different than the dark, foreboding feeling of the originals; there is a lot of color, festivity, and wild-life featured. A couple scenes last for a strangely long period of time; one of my friends thought that this was an attempt to get scenes from the book involved in the movie since much of it was obviously just Peter Jackson making stuff up.
Overall I didn't think it was as good as the first trilogy, but again, much of that may also be nostalgia from when I was younger. When I think back to the first movie of Frodo's journey, The Fellowship of the Ring, I remember it being substantially weaker than the following two. That's likely what's going on here - story-building taking precedence over getting into the epic adventures right away. My only real large complaint is that the main characters spent over half the movie running away from something while being scared shitless, which is kind of a let-down after the badassery of the first group of heroes.