Trying to find their way out of the forest of Mirkwood, the dwarves are captured by armed Wood-elves; Bilbo avoids capture because he is wearing the ring. Invisible, he follows the dwarves, who are taken by the elves across a bridge to the cave palace of the Elvenking. The Elvenking has them thrown them into separate prison cells. Bilbo remains invisible, hiding in the Elvenking's palace for a week or two, until he finds the dwarves; he also finds Thorin.
Bilbo carries a message from Thorin to the dwarves not to reveal their mission to the Elvenking. Thorin's respect for Bilbo grows. Bilbo discovers that a stream flows under the palace out to the river beyond the cave, and that empty wine barrels are dropped through trapdoors under the palace to float down the river to Lake-town. He steals keys from the prison guard who has fallen asleep drunk and releases the dwarves one by one. He presents them with an escape plan: If they will hide in empty wine barrels, they will be dropped through the palace floor into the underground stream where they may float down the river to Lake-town. They object to the danger of the plan, but finally agree to it in desperation. Bilbo packs the dwarves in the barrels and they are tossed through the trapdoors into the stream below. Bilbo, still invisible, clings to one of the barrels and floats with them to the place where the stream joins the river; there, he wades ashore. The next morning, he sees that the barrels have been bound together as a raft and he hops aboard as they continue to float toward Lake-town.
With Thorin and the dwarves in prison, Bilbo becomes responsible for the fate of the entire group. He uses the power of the ring to stay invisible and learn what he must to secure their escape. His resourcefulness grows, and he develops an escape plan that proves to be successful. He also exercises bravery in stealing the keys from the prison guard. He undertakes a risk in persuading the dwarves to go along with his plan, and that proves to be a risk worth taking.
You also see further characterization of the dwarves in this chapter when, under the leadership of Thorin, they refuse to reveal the nature of their journey to the Elvenking. This is part bravery and part dwarvish greed — refusal to share.
portcullis an iron grating hung over a gateway and lowered between grooves to prevent passage.
sleeping-draught a sleeping potion.
turnkey the person in charge of the keys to a prison.
toss-pot a drunkard.
mere a lake or pool.
eddying moving in a circular current like a whirlpool.
cask a barrel, usually holding wine.
shingly overlapping in rows.