And I mean beautiful. The Shire never looked more verdant and shimmering. Rivendell and its falling rivers was just breathtaking - you could practically feel the spray in the theater. The mountainous passes took your breath away, including a great battle, not just on the mountains, but of the mountains, or at least two mountainous outcroppings.
The characters were well drawn, too. Bilbo Baggins, at this stage, in this movie, carries none of the weight that his later self and Frodo must bear. So Bilbo, though older than Frodo, is much more like Merry and Pippin than Frodo in lightness of bearing - much like any Hobbit not beset by the burden of the ring.
The movie, much more a prequel to the Lord of the Rings movie trilogy than a treatment of the original novel, treats to us a delight of characters from the trilogy, including a cameo of Frodo and old Bilbo at the beginning (before the quest in Lord of the Rings begins), Elron (Hugh Weaving is one of my favorite all-time actors), Galadriel, Saruman, of course Gandalf and Gollum, and even that scowling old woman Hobbit in the Shire. There are also some good characters we haven't encountered before, including a trippin brown Wizard and his team of superfast rabbits, and all manner of Dwarves and Orcs.
Don't expect the profundity of Lord of the Rings, but the movie's a real pleasure to see.
See also Confessions of a Science Fiction Chauvinist, as Occasioned by Seeing the Two Towers