Goblin-town was an Orc dwelling in the Misty Mountains - a network of branching caves and tunnels which stretches out from the High Pass in the Northern part of the mountain range. (Goblin is the translation of orc used by Tolkien throughout The Hobbit.) Most of the tunnels were carved by the goblins, though they also incorporated pre-existing caverns and passages.
During their journey to Lonely Mountain (Erebor), Thorin and Company were captured by the goblins while they slept in the "Front Porch," the western entrance to the caves, thinking it was an empty cave. A crack opened at the back of the cave while they slept, and through that they were taken by the goblins down to the Great Goblin's cavern. Here they were saved by Gandalf, and the Great Goblin was killed, enraging the goblins. Pursued through the tunnels by silent goblins, Thorin and Company ran down a long tunnel. They were accosted, and managed to fight free, but Bilbo was knocked unconscious while the dwarves ran on unaware of his plight.
When he came to, Bilbo found a small ring on the floor (the One Ring, although he didn't know it then), and followed a tunnel down to Gollum's lake, where he met the creature Gollum, and played a riddle game with him. Toward the end of that game Gollum realized he did not have the ring and, suspecting Bilbo, chased after him. Bilbo, not realizing the ring's power, slipped it on, and Gollum could not find him. To keep Bilbo from escaping, Gollum ran toward the exit of the caves. Following the creature through the tunnels, Bilbo was thus inadvertently led by Gollum to the "back-door" (the eastern entrance to the caves). Bilbo then leapt over him in the dark, evaded some goblin guards, and squeezed through the final door, losing many of his buttons in the process, but escaping.
Portrayal in adaptionsEdit
In Peter Jackson's film The Hobbit: An Unexpected Journey, the Great Goblin's cavern within Goblin-town is depicted as a huge underground chasm with ramshackle slums and bridges stretching out along the chasm. As the goblins were scavengers, many thing were brought into the caves. Skeletons and skulls of humans and dwarves were everywhere, dwarf entrails were littered on the floors and other scavenged items were in the caves.
Rather than the brief skirmish that appears in the book when Gandalf slays the Great Goblin, in the film the company is seen fighting their way through hundreds of goblins as they escape. Near the exit, Gandalf kills the Goblin King, and the company then plummets down a deep chasm before reaching the back door and escaping.