They used a number of ways to shrink the hobbits in the film. They used scale doubles (it tells you who they are in the Film Companion Book), they shrank the real actors digitally, they used CGI actors in some places and they used two sizes of set/props and blue screens so it could be anyone of these methods or a completely different one, I don't know if there are any others but I presume there are.
Also, just as a side comment, Elijah Wood is 5'6, the tallest hobbit actor was Dominic (Merry) at 5'7!
didn't any of you see the extended DVD? They used 3 little people and 1 child as stands in. Dominic Monaghan's stand in was a young boy. They also used forced perspecive and blue screens for shots of different sized characters together. And yes they used digital animation for long shots like when they are running and crossing the bridge in Moria. It's all in the extended DVD and in great detail.
Well, no one was digitally anything. I'm told that the creators of the film used just about every method but. And once more, who cares if indeed they were children standing in? They have to be shortened somehow!
To anyone who believes that there were no stand-ins for the Hobbits, I am sorry to say you are wrong. While I'm unsure whether computer generated images were also used in some cases (I suspect there were though especially in the cave troll scene) it is certain that dwarf actors were used for some of the shots.
About a month ago, Sean Astin (Samwise) was on an episode of Conan O'Brien, and he mentioned specifically that his stand-in was Indian and happened to have a very noticeable "wobbly head motion" when he walked.
I hope this clears things up for people.
I would guess that they did that because the hobbits are only supposed to be about 3 1/2 feet tall -- wouldn't work if they used the ACTUAL actors, who are just as tall as the rest. I thought the kids were a good touch! :-)
Actually, the far away shots of the hobbits following Aragorn (Strider) or Gandalf are CG (computer animated). They do look sort of fake, but the hobbits look really cute and small. :) They aren't children...they are computer animated.