This story is very much apart of the fantasy genre. I first read J. R. R. Tolkein's "The Hobbit" when I was about ten years old or so and I absolutely fell in love with it... Harry Potter has nothing on Bilbo! I actually inherited a first edition copy of it (from 1937) with all of the original illustrations and green cloth cover.. so this particular book is very dear to me. Tolkein's descriptive imagery is really quite outstanding especially considering the use of song and rhyme that make up Bilbo's world.
An ironic part to this book is in the very beginning while Bilbo is "entertaining" the dwarves he listens to their enchanting music and can't even comprehend that the lyrics to the song reflect the journey he is about to ensue. All the songs and verses within the book are descriptive in the telling of location and what will happen. For a young adult book I think that the writing is quite inventive. Another aspect of fantasy that takes hold of Bilbo is how his persona and character is affected by the story rather than in most stories where the character is merely a character. The evolution Of Mr. Baggins is very humanistic and the fact that he craves/forced into adventure at a mature age makes the story even more fantastical. I also love the fact that a short "pleasantly plump" hobbit that is totally fixated on food and comfort becomes more and more like Indiana Jones. I will note, however that Gandolf does help in rescuing Bilbo and the dwarves since he can vanish and reappear so easily.
Their adventure includes encounters with elves, dragons, wolves, giant spiders, giant eagles, and goblins... this book has many rich and enchanted characters that are seen even now in popular fiction. Bilbo finds the lost ring from Gollum and uses riddles and trickery to keep it.. unaware of its dangers and ultimate power. Time is very precious to Bilbo considering his age and the ring seems to alter time [which forshadows the Lord of The Rings.] Along with the ring Middle Earth is introduced and also some of it's mysterious creatures. This is the only Tolkien book that I have read, but I've heard that it's one of the better. Ultimately this fantasy is portrayed so well that I don't want or need to question the fiction.