Michael Adams examines J.R.R. Tolkien's interest in philology:
Hobbit names are an interesting blend of borrowed and invented items. For instance, a few males of the Baggins family of Hobbits sometimes bear real — though indisputably outmoded — personal names, such as Drogo (name popular among the French nobility c1000 CE, but since, not so much), Dudo (name of a tenth-century Norman historian and ecclesiast), and Otho (name of a Roman emperor). Other masculine names are converted from surnames or words found in natural languages, such as Balbo, Bingo, Fosco, Largo, Longo, Minto, Polo, and Ponto. But still others appear to be well and truly invented by Tolkien, such as Bilbo, Bungo, and Frodo.
Jason Fisher, author of "Tolkien and the Study of his Sources," points out that Tolkien made the book more otherworldly after publication:
[I]f you read the first edition of "The Hobbit" you see all kinds of strange things, like references to policemen on bicycles, references to Lilliputians, a reference to the Gobi Desert, the wild wireworms of the Chinese, all of these references to the real world. After the first edition, Tolkien cut all of those references and made it more of its own separate world.