As anyone who has ever read a Lord of the Rings or Hobbit novel knows, Hobbits are short. They are usually about as tall as a human child and not much more than that. In fact, in the books they are often described as being shorter than dwarves.
This is because the dwarves in Middle Earth are much longer lankier creatures. They are also shorter than elves and men. This is why it's important that the filmmakers make the dwarves look right when they are portrayed on screen.
Hobbits are generally about two to four feet tall, though this can vary quite a bit from one hobbit to the next. Early in their history they were divided into three breeds, or tribes, with different customs and temperament: Harfoots, Fallohides, and Stoors. Harfoots were the shortest, with Fallohides being slightly taller and slimmer, while Stoors were larger in stature but still shorter than men.
The dwarves in Middle Earth are usually shorter than the men and elves, with a few exceptions like Gimli and Throin. However, the filmmakers do a good job of making the dwarves appear correctly scaled when they are compared to the other races in the movies.
As for a true hobbit, researchers are slowly assembling their story of the diminutive beings that lived on the Indonesian island of Flores. The extinct hominins, called Homo floresiensis, stood less than 4 feet tall and had brains that were only about a third the size of modern humans'. But they made stone tools and butchered meat. This suggests that isolation on islands can reverse the typical evolutionary trend toward bigger bodies and brains.