How to Create a Hobbit-Sized Illusion like The Lord of the Rings

Ever wondered how they create a Hobbit-sized person like those found in movies like Lord of the Rings?
 

 While "green screen" is the popular answer, this tutorial will show you everything you need to know about forced perspective, a technique which allows you to create these illusions in-camera.

Images via photography.tutsplus.com

Text and video via photography.tutsplus.com