Hobbits are smaller, tend to be curly-haired, dress 'chiefly in green and yellow', have hairy feet with thick soles, and live in hobbit-holes. Dwarves are slightly bigger, usually bearded, and live in mountains. Dwarves are miners and stone-workers and they like gold. Hobbits like eating and smoking pipeleaf. Dwarves are also much more war-like than hobbits - dwarves craft weapons and armour while hobbits don't involve themselves in war. Hobbits are also much stealthier that dwarves and can move about quite quietly and avoid detection.
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