Taken from
here.
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However, according to his own account, one day when he was engaged in the soul-destroying task of marking examination papers, he discovered that one candidate had left one page of an answer-book blank. On this page, moved by who knows what anarchic daemon, he wrote "In a hole in the ground there lived a Hobbit".
In typical Tolkien fashion, he then decided he needed to find out what a Hobbit was, what sort of a hole it lived in, why it lived in a hole, etc. From this investigation grew a tale that he told to his younger children, and even passed round. In 1936 an incomplete typescript of it came into the hands of Susan Dagnall, an employee of the publishing firm of George Allen and Unwin (merged in 1990 with HarperCollins).
She asked Tolkien to finish it, and presented the complete story to Stanley Unwin, the then Chairman of the firm. He tried it out on his 10-year old son Rayner, who wrote an approving report, and it was published as The Hobbit in 1937. It immediately scored a success, and has not been out of children's recommended reading lists ever since. It was so successful that Stanley Unwin asked if he had any more similar material available for publication.
By this time Tolkien had begun to make his Legendarium into what he believed to be a more presentable state, and as he later noted, hints of it had already made their way into The Hobbit. He was now calling the full account Quenta Silmarillion, or Silmarillion for short. He presented some of his "completed" tales to Unwin, who sent them to his reader. The reader's reaction was mixed: dislike of the poetry and praise for the prose (the material was the story of Beren and Lúthien) but the overall decision at the time was that these were not commercially publishable. Unwin tactfully this messge relayed to Tolkien, but asked him again if he was willing to write a sequel to The Hobbit. Tolkien was disappointed at the apparent failure of The Silmarillion, but agreed to take up the challenge of "The New Hobbit".
This soon developed into something much more than a children's story; for the highly complex 16-year history of what became The Lord of the Rings consult the works listed below. Suffice it to say that the now adult Rayner Unwin was deeply involved in the later stages of this opus, dealing magnificently with a dilatory and temperamental author who, at one stage, was offering the whole work to a commercial rival (which rapidly backed off when the scale and nature of the package became apparent). It is thanks to Rayner Unwin's advocacy that we owe the fact that this book was published at all - Andave laituvalmes! His father's firm decided to incur the probable loss of £1,000 for the succès d'estime, and publish it under the title of The Lord of the Rings in three parts during 1954 and 1955, with USA rights going to Houghton Mifflin. It soon became apparent that both author and publishers had greatly underestimated the work's public appeal.
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