Smaug was a fire drake from the North and the last great worm known in Middle Earth. His origins are obscure, it is speculated that he is descended from the many dragons of the War of Wrath, though significantly smaller. He conquered Erebor from the dwarves and laid waste to the neighboring trade city of Dale, inhabited by Men. He was drawn to Erebor from the wastes of the North for the great treasures it held. He reigned as King Under the Mountain for nearly two centuries, sleeping on the gems and gold he conquered which formed a protective armor on his soft underbelly. Thorin Oakenshield led a company to reclaim Erebor, as he was it’s rightful heir, with them came Bilbo Baggins the company burglar. As Bilbo attempted to steal back the treasures of Erebor he was discovered by Smaug, interrogated following a game of riddles, and narrowly escaped with his life, but with valuable information about a weak point in Smaug’s nearly impenetrable scale and gem armor. In a rage of suspicion Smaug believed that the men of Laketown, refugees of Dale, were behind Thorin’s attempt at usurping him, and flew out to destroy them. Though information of his weakness passed through a thrush bird, who sent this information to Bard the Bowman, descendant of Lord Girion of Dale. Bard led a company of archers in defense of Laketown and slew Smaug; armed with this vital knowledge and a Black Arrow, an heirloom of his family. Smaug’s destruction allowed for the reconstruction of Dale and left the riches of Erebor up for grabs, which caused plenty more headache.
“Never laugh at live dragons, Bilbo you fool!“ he said to himself, and it became a favorite saying of his later, and passed into a proverb.” – Bilbo Baggins, The Hobbit, Inside Information