"Is that a hobbit over there?.
No that's a hobo and a rabbit, but they're making a hobbit."
- – Futurama
A humanoid fantasy people created by Tolkien who's primarily identifying characteristics are that they are short, have hairy feet and enjoy drinking, eating, and smoking some of that delicious tobacco. Hobbits are country-dwelling halflings who form farming communities consisting mostly of their race. While hobbits do form self-sustaining communities, they are known to indulge in laziness, taking many naps.
Hobbits are essentially rural Englishmen, and they are portrayed by Tolkien as decent, hard-working folk. This may have something to do with the fact that Tolkien was an Englishman, and loved nature and the countryside. Keep this in mind when you read about what happened to the Shire at the end of "Return of the King." That said, they avoid Mary Sue territory as (with a few exceptions) their ambitions ends at a reasonable home with six meals a day and have basically no interest of things outside their collective comfort zone once they manage to set that up. They might make some superb apple pies and mushroom and beef stew, but they'll never forge Empires, unlock the the secrets of the universe or ascend to the stars and they're totally cool with this. This complacency nearly brings them to ruin when they forget that there are some bad motherfuckers outside the Shire, like washed-up wizards who want to strip-mine the Shire purely out of spite. But once properly motivated, they can be a force to contend with.
In Tolkien's works, hobbits are fond of smoking a substance referred to as "pipeweed." Although it is clearly stated to be tobacco, most people joke about it being marijuana instead (which is reinforced by the hobbits' laid back nature). Always popular due to the easily accessible joke about Samwise Ganja.
Hobbits aren't any good at fighting: they lack strength, resilience and reach even in comparison to humans (which are pretty average at this point), so in close combat they tend to die horribly even against almost the equally pathetic goblins. The sole exception to this was Bandobras "Bullroarer" Took, who was so big he could ride a horse, and used a stick to swat off a goblin chieftain's head, launching it down a rabbit hole and inventing the game of Golf in one stroke. On the bright side, hobbits are very agile, are excellent at sneaking and not being found when they don't want to be, and possess crazy good aim when shooting and throwing things, which actually makes them perfect scouts, thieves, archers and ambushers. Except they are a peaceful and rural people, who disrespect any "glory", "honor," and "adventure" bullshit the tall folk are so fond of. Therefore, they only fight if invaded (which they were only twice in their history, both times ending very, very badly for the invaders).
So, why are they on here?
Beyond the fact that Tolkien is generally held up as the grandfather of modern fantasy gaming? It all goes back to Dungeons & Dragons. See, in first edition, even before then, back when D&D was still little more than a warband game with some leveling up mechanics being attached, Gary Gygax and crew started to add non-human races to the game. Since Tolkien was really super huge in their kind of circle in those days, naturally, they stole most of their ideas for demihumans directly from him. And that included taking hobbits as one of the options, alongside the dwarf and elf races.
Of course, Tolkien's estate wouldn't stand for it under copyright laws, and threatened to slap Gygax in the face with a lawsuit. So, Gygax changed the name of D&D's hobbits to "halflings", after an alternate name used by humans to refer to them throughout the trilogy, and then changed... nothing else. And, somehow, it worked. Tolkien's family couldn't/didn't sue, and D&D went on to be a huge success.
After Wizards of the Coast took over though, the Halflings slowly became less and less hobbit-like, under the not-unjustified presumption that "simple Countryfolk with a penchant for napping and stuffing their face being shanghaied into adventuring" was kind of a one-trick deal.
Also, Games Workshop did a Lord of the Rings warband game to cash in on Peter Jackson's films of first the Lord of the Rings trilogy and then The Hobbit, which is pretty meta when you consider the D&D connection hobbits have.
In Warhammer Fantasy, the local halflings of The Moot are basically a grimdark take on Hobbits, taking all of the standard traits and using them with a coarser touch. The Ratlings of Warhammer 40,000 are literally Warhammer's halflings in space.