In order to convincingly depict the massive height and size difference between the four-foot Hobbit characters and, well, everyone else, Peter Jackson employed a number of dizzyingly clever practical techniques, along with some necessary digital touch-ups.
Short and tall body doubles were used, entire sets had to be built to two separate scales and takes were often spliced together through clever, CG-assisted editing and compositing.
But the pièce de résistance? Jackson often used the brilliant simplicity of forced perspective photography to sell the size differential, placing actors further apart than they actually seem in order to imply a greater difference in scale.
This isn't too challenging for static, locked-off camera shots, but Jackson dared to also employ the tactic with a moving camera, and this is where things get really insane.
Jackson's crew used a motion control camera rig, which was linked to another motion control rig designed to move the actors and props around in perfect sync with the camera movements, ensuring that the illusion wouldn't be shattered.
Why Nobody Believed It
Because, honestly, your average moviegoer would (understandably) never believe that a film crew would actually go to all this trouble to film the scenes practically, when shooting the actors against green screens and compositing them together in post-production seems so much easier.
It's a perfect example of an effect so ingenious and so seamless that audiences would never even entertain the possibility it was actually executed that way.
Sadly Jackson didn't repeat the trick in his The Hobbit trilogy, citing the difficulty of making forced perspective convincing when shooting in 3D.
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