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The game opens with a cinematic sequence which, depending on your reading (or spacebar-pressing) speed can take anywhere from one to four minutes. It's little more than a bare-bones account of the early chapters of the book: Bilbo vanishes from his birthday party and the Shire, Frodo inherits the Ring, Gandalf comes back a few years later and tells him the Ring is an artifact of ultimate evil and must be destroyed, etc. etc.
I'm not doing anything screenshot-wise with it because it's not that funny and the vast majority of you know the story either from the books or the movie; for the few who don't, and for those who want to see the movie in all its early-90's VGA glory, here it is on YouTube. If you go there, give it a like as thanks to the guy who posted it.
The only thing I wish to draw your attention to is this image:
That is Frodo and Gandalf, of course. Contrary to what their expressions indicate, Gandalf has just finished telling Frodo that the Dark Lord is coming to get him and his only hope for survival is to embark on a perilous journey to Rivendell bearing the most dangerous artifact in all of Middle-Earth while undead horrors dog his every move. I would make fun of the inappropriateness, but the truth is that Frodo's expression is a fairly good indicator of how he's going to behave in this adventure.
Immediately following the cinematic we are unceremoniously dumped into the game, standing just outside Bag End, Bilbo's home from The Hobbit and, until recently, Frodo's home as well. The two hobbits standing to either side of Frodo are Sam and Pippin. They are not yet in our party. Let's rectify that. We right-click to clear the soul-stirring narration from the screen.
The entirety of the game, barring the odd cinematic here and there, takes place on map screens like this. The mouse changes directions depending on what quadrant of the screen it's in; we can left-click to make Frodo and the Fellowship walk in four directions. The arrow keys also make Frodo move, but there's an annoying two-second delay between the first step and continuous walking, so it's more suited to navigate the party through complicated terrain or to approach dangerous things (there will be plenty of both in the game). Right-clicking brings up the main menu.
Virtually all the game's interaction takes place from this menu. Left-click uses a command, right-click backs out. Let's take a closer look:
The swinging sword is for attacking. It is used only in battles, as far as I can remember; combat initiates automatically, and using this option outside of combat mode gets you nothing but a buzzer noise.
The hand reaching for the lacrosse ball is Take, which is pretty self explanatory. If there is anything to be taken, clicking this brings up a list.
The arm about to paste somebody with the lacrosse ball from before is a generic Use/Equip/Trade menu. I'll explain what little there is to it later, but again, it's pretty self-explanatory.
The scholar's cap takes us to the Skill menu, which I will get into later.
I guess I have to grant it to the game's designers that it would be hard to mistake this for anything but a Magic menu, but they might have picked something better than a stage magician's wand to represent the mysterious and awful powers that animate Tolkien's world. We won't be making any doves fly out of hats, but there are certainly a few tricks up our sleeve in this game, and I'll get into them as they emerge. On the whole, though, this game is not very heavy on magic, so don't expect us to be using this much.
This icon lets us Talk to anything in the overworld that we are close enough to and that has anything to say to us. There are some semi-extended dialogues in the game powered by a ?key word? system similar to the middle-era Ultima games, and I'll go into that later.
This human pyramid lets us change the default leader of the Fellowship. Its main use is actually related to combat ? since the leader of the party takes point when moving, he usually ends up in the front in any combat scenario, so it makes sense to make a tough character the leader. For now, though, we have nobody better than Frodo, so we won't be using it much.
This icon is important: it lets us change the menu focus to any member of the Fellowship, so we can access their skills or inventory at any time.
It took me for fuck-all ever to realize that this is supposed to be the front door of Bag End; it looks more like a bird's eye view of a fountain or something. In any case, this exits the menu, which is kind of pointless since a right-click does the same thing with less effort. And honestly, who puts an EXIT sign on the outside of his front door? 
And that's it! For now, let's see what old Sam has to say. We stand in front of him open the menu, and select the Talk icon.
This opens up the Talk menu. Selecting option number 3 gets us this:
Finally, selecting Sam gets us an actual bit of dialogue, which looks like this:
: If I did, I certainly wouldn't be taking you, Sam. But you've got an honest face, so come along. You can at least absorb a hit or two with that face of yours.
: Oh, that's cold, Mr. Frodo.
We back out using right-click to the Talk menu again and select Recruit this time.
Note that Pippin is available here even though he's not in normal talking range. Not sure why the recruitment range is longer than the talking range, but it's just barely possible I may be able to exploit it in the future to break the game. I make no promises, though ? it's been so long since I last played through this game that it's bordering on a blind LP, at least after we get past the earlier parts. We can't talk to Fellowship members, so we'll just recruit Sam for now. One click and a bunch of backing out later, and Sam is our first party member! 
: I'll follow you to the ends of the earth, Mr. Frodo! And if those Black Riders try anything, they'll have Sam Gamgee to deal with!
: Ah ha ha ha ha. That's good, Sam. I'll let you know when I need something carried.
And that's more or less how everything in the game works: open a menu, pick an icon, navigate a list, see the results. Hardly anything is animated (and the things that are are rather minimal), and there's not much visual variety. Naturally, I'll be skipping the bulk of the menu-navigation for this LP, but I wanted you all to have some idea how the game plays.
Let's see what Pippin has to say.
: That hat is ridiculous, Pippin. What do you think this is, a Mark Twain book? But you make a much stronger argument than Sam, so I guess you're hired for now.
: Off to adventure!
: Nah, not yet. First I'm going to make sure I didn't leave anything in Bag End that wasn't in the bill of sale to that old hag, Lobelia.
Both hobbits are now following Frodo. There is no formation; each member uses an individual pathfinding AI, which leads to much jostling against each other and getting stuck behind objects. Fortunately, any Fellowship member who gets stuck long enough to scroll offscreen teleports back into the main party, so we don't run into any Secret of Mana problems where your partners' idiocy traps you until you extricate them manually.
The door directly in front of us leads into Bag End. The Hill itself seems markedly absent, so Bag End is apparently dug straight down into the ground. But I'm sure it's pleasant and cozy indoors ? after all, it is a Hobbit hole, and that means comfort!
These text windows pop up frequently; they're almost the sole means of knowing when there's something to be interacted with in the game. But sometimes they're only there for description or exposition. This will pop up whenever I come near this door ? the flag never clears. It's only slightly annoying, though. Clearing it and walking up to the door automatically warps us into the new map.
: Ah, Bag End. The biggest and most comfortable hole in The Hill, or anywhere west of the Brandywine?
: ? oh my God. Frodo, what happened to the floor?
: Whatever do you mean, Pippin?
: It's just bare dirt, Frodo. Where are the rugs and floorboards?
: I told you we were coming in here to make sure nothing was left behind that wasn't in the bill of sale, Pippin.
: Yes, but?
: The floor was not in the bill of sale, Pippin.
: ?
: I never thought I'd be saying it, but I feel sorry for the Sackville-Bagginses...
Apart from the conspicuous lack of flooring, which is in no way due to the graphical and memory limitations of early 90's DOS games, Bag End is more or less how it's represented in the books.
It's basically a long hallway with rooms lining either side. I assume the south ones are the nicer rooms mentioned in The Hobbit (having windows and all). There's no indication of it in-game, though.
Of the fourteen rooms in the map, exactly three are of any interest to us. This is reflective of the game's map design as a whole ? if anyone wants to play along, expect to spend lots of time walking through empty areas looking for invisible event flags. 
One of the useful rooms is this little storage closet in the far southeast. This little message pops up, indicating that there's something to take. Opening the menu and selecting Take gets us this:
: *yoink*
: I suppose these will be more useful to us than to Lobelia and Lotho.
In the next room over, we get this message, which marks a good chance to show off the Skill menu. We open the menu and use the Character Select icon to pick Pippin, who is just the sort of rogue to have the skill we need.
Skills come in three flavors in this game: combat, lore, and active. Combat and lore skills are passive and are listed in this menu only for reference ? in this list, 'brawl' is a combat skill. The rest are active. Active skills must be used at appropriate times to advance in the game. In this case, we want the 'picklock' skill, obviously.
: Piece of cake!
: I'm both impressed and disturbed at how easily you did that, Pippin.
: Oh, old Bilbo's locks never gave me any ? er, that is, it was a pretty...basic...lock...
: Forget it. Let's see what's inside.
: Oh, this definitely wasn't in the bill of sale. Come to papa.
This is good, since, to my knowledge, there's a limited amount of money in the game and quite a bit of stuff that's useful or necessary to buy. Money should be taken whenever (safely) possible.
The third room that we want is the library and ? wait, what the heck does that mean!?
Back in the 90's when games were on floppy discs, companies tried to discourage copying by including documentation in the manual that was required to progress in the game. You can see something like it in the random questions Steve the Avatar gets asked periodically in Nakar's Ultima LP's. This game does it like this: a lot of the time (and I mean a lot of the time) the popup window will have a reference to a numbered paragraph in the game's manual instead of direct information, requiring the player to thumb through the thick book that came with the game to see what the hell is going on. One might theoretically play the game without the manual, but it would take a lot of experimentation, and a lot of the flavor of the game would also be lost. My brother and I wore the hell out of that book in the old days and it's long gone by now, but thanks to the power of digital media, I am able to provide you with the full experience of the game, minus the sore fingers.
?Paragraph 182? posted:
You have entered the library of Bag End. There are many books of
hobbit lore, as well as several volumes of elven lore from Rivendell.
You loathe the idea of Lotho fingering Bilbo's beloved books, but
somehow doubt that Lotho Pimple has the imagination or curiosity to
ever look at them.
Yeah, riveting stuff, I know. This is just a colorful prompt to use the 'read' skill, which Frodo (and only Frodo, Sam and Pippin are illiterate) possesses. Doing so gets us...
...another paragraph! Yay!
?Paragraph 117? posted:
A note from Bilbo says: "Must ask the Brandybucks about Old
Forest." You put this down for a copy of something far more
interesting, the Lay of Leithan, the song of
Beren and Luthien. It says that Luthien danced by the shores of the
river Esgaldil when the world was young, and some of the waters of
Middle-Earth still remember her. In
places where the elves still dwell, her memory will stir the waters to
a powerful defense, even against the mightiest of foes.
After closing that prompt, another appears:
At least it wasn't another paragraph. Looking those things up is tedious. Three things to be gained here: two hints about future conversation options (both unnecessary for somebody familiar with the original story, but it was nice of the designers to accommodate newcomers), and something else...
...which we can see here, in Frodo's Magic menu. Spells come in two flavors in this game: genuine magic, and magic words. The former is restricted to a very small selection of characters (generally the ones known to have magic in the books, like Gandalf), and so we won't get into them for some time, but anyone can learn magic words. Every character in the canon Fellowship group begins with the '!Help Help' word, and can learn others at certain points throughout the game. Magic words are one-shot spells that have specific effects and can generally only be used at certain points in the game, kind of like skills. The '!Luthien' word you see here is the result of Frodo's recent reading jogging his memory a bit. That word will become important later; those familiar with the books and movies might guess where, but if anyone wants to make it explicit please use spoiler tags.
Well, that's it for Bag End and the majority of the game's mechanics! Next update, we venture into the wild, untamed lands of the Shire, where Frodo and his brave companions face wolves, giant spiders, and the most dangerous foe of all: Lobelia Sackville-Baggins. 