There was once a time when I could have recited to you (at endless length) the exact details of how they filmed the Hobbiton scenes, but most of that knowledge is long forgotten. Fortunately, some of it was reawakened today!
The Shire sets was built as an actual village. There are no transitions between filming locations- it's all there and every inch is designed to be Hobbiton. Peter Jackson is known for his painstaking- and obsessive- adherence to detail, and so everything looks exactly as realistic as you'd ever hope. In fact, the New Zealand government lent Peter Jackson the Army to come in and built hill, bridges, and roads to make the location perfect. Tolkien described Hobbits sitting under plum trees, but Jackson didn't like the look of the trees. He had apple trees planted, the fruit ripened and picked off, and plums attached. He created the tree above Bag End and, when he didn't like the exact color of the leaves a few weeks before filming, he had his crew go in and individually spray paint every leaf. When you visit Hobbiton, you're really in it, and everything is perfect. They built The Dell even though it was never on camera. The party tree was there. Bag End was, of course, but so was Sam's bachelor Hobbit Hole and the one he shared with Rosie at the end of Return of the King. The party tree was amazing, and in the distance were rolling hills and grazing sheep. Even the walk between Hobbiton and the Green Dragon Inn was realistic. I could have spent a lifetime.
We were lucky that the weather was perfect and, since it's still early in spring, we had a small tour group! We've got some great photos to share. I already want to go back! FOREVER.