This question originally appeared on Quora. 
Answer by Joshua Engel, Polymath
Well, I think it helps better answer the question of how they're going to split it. Once you've decided to lengthen it beyond one film, there wasn't a really good place to split it into two movies. After the Hall of the Elven King is really late, but there weren't any good stopping points near that.
As three movies, I see a fairly natural stopping point after Gollum, and again as they reach Dale. "Riddles in the Dark" is a bit early, perhaps; it's only chapter five. But given how strong a character Gollum became after The Hobbit, that entire sequence can be given a lot stronger context, and played out for its full length. (All of the riddles, for example.)
They're still going to have to beef it up some, probably adding more Dwarf back story and White Council stuff. It sounds to me as if they'll aim for a shorter movie, perhaps under two hours, which may feel a little skimpy for what is seeming less like a kid's movie and more like an epic.
As for Bilbo, it lets them divide his character arc into three parts. In the first part, he goes from your stay-at-home Baggins to having one genuine adventure on his own (as well has his failure to burgle the trolls). In the second part, he becomes a hero, rescuing the Dwarves from Elves (as well as the various miscellaneous adventures with Beor and the Goblins, which I think fit less well into the overall arc but are still part of the story). In the third, he really comes into his own, having a battle of wits with Smaug and helping keep the Dwarves on track after they realize that they had no serious plan to cope with the dragon. "It will not do to leave a live dragon out of your calculations if you live near him."
I'm not crazy about taking the focus of The Hobbit so far off of the Hobbit. Fans have long known how seemingly throwaway remarks in the book connect the book to the much larger story, but I believe that such things are best left for the careful reader. All of that unread material adds depth to the world: you can sense that it's there and draws you into the "secondary belief" that makes you want to read more. Putting all of your cards on the table feels "thin" to me: this is everything we've got and there's no more to go get. Of course with Tolkien, there is even more story than we're going to get here, because the man was a sub-creator to the point of creepy obsession, but still ... I'd rather have seen the book taken to film as it was.
Instead, they're going to give us more of an LotR prequel, which I guess is going to be OK. There are so many changes between the two (see, for example, the character of Gandalf) that they were going to have a hard time reconciling using the same actors for both. Converting The Hobbit into this kind of larger-scale epic will help solve that, at a loss of focus that made the book so charming.