My father once set out to read The Hobbit to us, his three young children, all close in age. He never quite finished, I think it was because it was an early Ballantine edition he was reading from, which had no illustrations (except for the maps). Hard to hold the interest of kids aged 4 through 7. Tolkien of course had done illustrations for the Hobbit, but these were not then widely published.
"in a hole in the ground lived a hobbit."Illustrations have increased a lot. Maybe you've seen the ones by the Hildebrandt brothers, which I found to be competent but rather boring. Tolkien's own illustrations have been published in book form (here's a sample. Tolkien was not an especially adept artist (he could not draw people very well), but his works were more dreamlike and less "realistic" than the Hildebrandts, and at least IMHO more suitable. Tolkien himself did the maps for The Hobbit, over which many a young reader puzzled out the path of Thorin and Company.
The Hobbit has been translated into many different languages, and these translations have often been accompanied by fresh and interesting illusrations. An excellent on-line collection of the covers of these translations can be seen here. Wikipedia has a handy list. Tolkien, being a linguist, was very interested in the translations of his work, and I'm sure it would have pleased him to know that there is now a translation in Finnish, the model for one of his Elven languages.
Naturally a Latin edition (popular in Latin America?), Hobbitus ille aut illuc atque rursus retrorsum, published in 2012. There are two Persian translations, one published in 2002, and another, هابيت يا آنجا و بازگشت دوباره (hābit yā ānjā va bāzgašt dobāre), published in 2004. It's wonderful that hobbit is almost the same word in Persian: hābit, and it may well be that Persian children are reading hābit yā ānjā va bāzgašt dobāre right now.
There are at least five Russian translations, some of them are supported by splendid illustrations by the Soviet artist Mikhail Belomlinsky, done in 1976. He also did new maps with place names in Russian. You can check out the 1976 Russian Hobbit here (Note that Bilbo is shown having hairy legs and not just the top of his feet -- this was due to a mistake in translation.) Our country is fortunate to have Mr. Belomlinsky, who has done many other fine illustrations, living in New York since 1989.
I should also mention that that there are two Hebrew editions, and while I'm in no position to judge, I understand that the better version was produced by Israeli soldiers who where held as prisoners of war in Egypt for several years in the early 1970s. They had not a lot to do and did have an English edition of the Hobbit, and hence the Hebrew translation. Tolkien, a soldier himself once, who was invalided out of the service and spent years in recovery, would have well appreciated this.
Well, those are just my random thoughts on this. If you're interested in The Hobbit and Tolkien, I highly recommend an excellent book, The Annotated Hobbit, by Douglas A. Anderson.