progresses, he gains physical strength and endurance and increasing confidence in his own skills and cleverness. He also begins to assert himself more. The key episode in his character development is Chapter 5, in which he ends up left on his own and encounters Gollum. He ends up using his own wits to escape a terrifying situation. Even more importantly, at the end of the chapter, he is called upon to decide what sort of adventurer he will become with his new found strength, and chooses a path of mercy and kindness, letting Gollum live despite knowing full well that Gollum had planned to eat him. 

The transformation of Bilbo from home-loving hobbit to an equal of the dwarves in their life of adventure is seen in Chapter 8 when Bilbo saves the dwarves from the spiders and realizes the degree to which he has changed and become braver and stronger. 

The Hobbit brings us the beloved character of Bilbo Baggins, a hobbit with more to him than at first appears. Here are some quotes from the book which give us a glimpse into Bilbo's character development.

Still it is probable that Bilbo... although he looked and behaved exactly like a second edition of his solid and comfortable father, got something a bit queer in his make-up from the Took side, something that only waited for a chance to come out.

The Tooks are a queer lot in Bag-End. They're adventure-seekers and daredevils, and Bilbo, although only half a Took, is certainly no exception. Though at first he may appear just like his "solid and comfortable father," Bungo Baggins, Bilbo is really a hero in hiding, waiting for his chance to prove it. Even Bilbo himself at times shows an unwittingly Tookish side to him.

“Bless me, life used to be quite inter- I mean, you used to upset things badly in these parts once upon a time.”

The Took has nearly been driven out of him, but not quite. Gandalf can still see it.

“There’s a lot more in him than you guess, and a deal more than he has any idea of himself.”

Even before the adventure of the spiders, Bilbo is beginning to show signs of his inner hero. When he comes upon the trolls in the woods, he is frightened, but he goes closer and attempts to pickpocket one of them. Even though this attempt proves fruitless, again and again, we see Bilbo performing small acts of courage that show us his development.

Another example of his courage is when he comes upon Gollum in the tunnels. He is terrified, as any reasonable person would be, but his words and manner are confident, and he even gibes at the creature.

After some while Bilbo became impatient. “Well, what is it?” He said. “The answer’s not a kettle boiling over, as you seem to think from the noise you are making.”

Later in the book, Bilbo is able to save the dwarves from the spiders, coming up with a plan and acting swiftly, alone and unaided by anyone.

Things were looking pretty bad again when suddenly Bilbo reappeared and charged into the astonished spiders unexpectedly from the side. “Go on! Go on!" He shouted, “I will do the stinging.” And he did. He darted backwards and forward, slashing at spider-threads, hacking at their legs, and stabbing at their fat bodies if they came too near.

Bilbo himself acknowledges the change within himself later in the book.

Bilbo began to feel there really was something of a bold adventurer about himself after all.

When the company makes it to the mountain and finds Smaug, Bilbo calmly comes up with a plan and acts upon it, despite the dangers. He volunteers to go down into the dragon's lair again, even though he has already been once and they know that the dragon is very angry.

“Now I will make you an offer. I have got my ring and will creep down this very noon - then if ever Smaug ought to be napping - and see what he is up to. Perhaps something will turn up. ‘Every worm has his weak spot,’ as my father used to say, though I am sure it was not from personal experience.”

And once Bilbo is there, talking to Smaug in riddles to buy time, he finishes his conversation with an almost sassy parting speech.

“Well, I really must not detain Your Magnificence any longer." He said, “Or keep you from much-needed rest. Ponies take some catching, I believe, and so do burglars.” He added as a parting shot.

Bilbo's wit leads Smaug to chase him out with fire, but even after this, Bilbo keeps his head. Later on, he makes an attempt to save everyone the trouble of war by stealing and handing over the Arkenstone.

Yes, Bilbo has changed much from the worried little hobbit from Bag-End, and he returns as a fierce and intelligent hero with more than gold to show for his adventures. As Gandalf himself remarks:

“My dear Bilbo!” He said. “Something is the matter with you! You are not the hobbit that you were.”

Throughout the course of The Hobbit, Bilbo Baggins learns to adapt, problem solve, and finds his own strength and courage.  One of the most revealing moments comes in the end when Bilbo must sneak into Smaug's lair.  "Already [the dwarves] had come to respect little Bilbo.  Now he had become the real leader in their adventure.  He had begun to have ideas and plans of his own" (199).  Bilbo has really come into his own, developing his leadership and taking command of difficult situations.  He becomes the most dependable member of the party: rescuing the dwarves from the spiders, liberating them once again from Thranduil's dungeons, discovering the secret door to the Lonely Mountain, and facing down Smaug.

As much of Bilbo grows and adapts, there is much of his character that remains the same.  His loyalty and honest heart remain as steadfast of traits as they were in the beginning.  Bilbo tries to mediate the elves and dwarves by offering the Arkenstone to Thranduil, saying:  "I may be a burglar--so they say: personally I never really felt like one--but I am an honest one, I hope more or less" (244).  Despite all the high adventure, battle, and intrigue, Bilbo stays true to himself.  He remains loyal to the dwarves throughout the novel, even when it goes against his own self-interest to do so.  Many times he could have abandoned them to secure his own comfort, but Bilbo stays true as seen in his response to the Elf King's invitation to stay with him: 

" Thank you very much I am sure," said Bilbo with a bow "But I don't think I ought to leave my friends like this, after all we have gone through together." (244)

Adventure strengthens Bilbo's best character traits, making him more dependable and loyal than ever.  In the end, he emerges a true hero.

In Chapter One of The Hobbit, Bilbo Baggins is described as a peace-loving person who enjoys the comforts of life, living in his beautiful hobbit home in the side of a hill. He loves food, his pipe, and an occasional stroll around. 

All this is disrupted by the visit from Gandalf and the party the dwarves had in Bilbo's house. He is very disturbed by the chaos and upset with the unexpected guests. He is glad to get rid of them. Yet, somehow, he finds himself following them the next morning and embarking on an uncharacteristic adventure. 

While the dwarves don't think much of Bilbo, by the fourth chapter, he has already saved them from evil trolls, surprising them and himself. The completely unadventurous hobbit has become an indispensable member of the group. In chapter four, adventures continue and Bilbo ends up separated from the party; he will soon acquire the ring that will become part of his nephew Frodo's long adventure. 

In short, Bilbo Baggins at the beginning of the story is completely unadventurous. He becomes a reluctant adventurer at the beginning of the journey but also the person who saves the rest of the party more than once.