Being as I like the LOTOR movies,
"lord of the online rings"?
The breathtaking story of the kids who play LOTRO?
Or is this one of those rule 34 thingies where you don't want to know what the rings are?
1) Tolkien started on the mythologies of what would become Eä long before the 1930s when the Hobbit was finished.
2) After the Hobbit became a success the publisher asked for more. Tolkien made a draft on Silmarillion, which was rejected, and then The New Hobbit which became the Lord of the Rings. During the work on the later volumes he came up with new/more ideas, myth and backstory for the myths which he wanted to revise in the Hobbit. So later editions of the Hobbit included retcons to fit better with the Lord of the Rings stuff. (Like Gollum no longer parting on good-ish terms with Bilbo).
3) Some of those things that came up after the Hobbit became a success was that the mythology needed names so people could refer to them. So when drafting silmarillion he re-used the north germanic use of middle earth as the world of men (middangeard
). While the world was called Arda, and the universe was Eä.
So it's not that the Hobbit was not set in middle earth, but rather that Tolkien's concept of middle earth always was a work in progress and wasn't fully formed at the time. After the release of Lord of the Rings he even started completely rewriting the Hobbit to better fit with his later ideas, but that effort was rejected by the publisher because it ruined the original's happy-go-lucky feeling and was horribly paced.
Now what you are refering to is stuff like this:http://www.newsfrombree.co.uk/jrrt_int.htm
T: ...long before I wrote The Hobbit and long before I wrote this I had constructed this world mythology.
G: So you had some sort of scheme on which it was possible to work?
T: Immense sagas, yes ... it got sucked in as The Hobbit did itself, the Hobbit was originally not part of it at all but as soon as it got moving out into the world it got moved into it's activities.
But I wouldn't agree on your interpretation. Instead I'd say it sounds more like while the 'idea' for the Hobbit came by itself, but during the writing progress the backdrop and the world became Eä. So when finished it definately took place in that mythology.
Also regarding your earth comment:
G: I thought that conceivably Midgard might be Middle-earth or have some connection?
T: Oh yes, they're the same word. Most people have made this mistake of thinking Middle-earth is a particular kind of Earth or is another planet of the science fiction sort but it's just an old fashioned word for this world we live in, as imagined surrounded by the Ocean.
G: It seemed to me that Middle-earth was in a sense as you say this world we live in but at a different era.
T: No ... at a different stage of imagination, yes.