It was intended to be a children's book.
On Tolkien's originality: yes, elves and halflings and goblins and such all came from earlier works. I sincerely doubt that anyone gave them the thorough treatment that Tolkien did (read the Silmarillion if you doubt me on this). And Tolkien was a true poet when it came to his prose. It's one thing to write about elves; it's quite another to generate the sense of wonder that Tolkien could with a few choice phrases.
I've been reading LotR to my son for the past year or so (a few pages a night before bed), and he loves it. He read the Tolkien Biography to himself as well, and he really enjoyed it.
I'm finding that reading the books as an adult I'm finding a good many things that I didn't notice as a child or teenager.