I would say that there are a couple of distinct elements of fantasy in the Tolkien work. The Shire might be one such setting. The notion of Hobbits running about in this isolated world is one steeped in fantasy. I think that this represents one aspect of it. The mere development of the ring, how it was forged, and gifted to its recipients are also elements of fantasy for they remind us of another world, a realm where such a concept could exist. I would also say that Sauron, as a character and force, is an element of fantasy. The notion of this supreme force of evil as one dominating consciousness, seeking to retain the ring to appear back in Middle Earth would represent another element of fantasy for it conjures up imagination that is transcendent of real world qualities.