There were three types of serpents created by the evil Lord Melkor, those that slithered, those that walked on legs and those that flew. The flying dragons were divided into cold-drakes who fought with tooth and claw, and the Urulóki fire-drakes who destroyed with fire. They had a keen sense of smell and could name any creature simply by its odour.
Smaug the Golden was a fire-drake, who had come from the Grey Mountains north of Mirkwood to live in the Lonely Mountain, Erebor, which had once been the kingdom of dwarves. The dwarves fled or were killed, and Smaug took their riches. He lived in the mountain undisturbed for two centuries, until Thorin Oakenshield led twelve dwarves and Bilbo Baggins to the mountain to reclaim some of their treasure. Bilbo used the Ring to enter the dragon's chamber, and identified a weak spot in his armoury of iron scales and embedded gems. When Smaug was aroused by Bilbo's theft of a golden cup he left the mountain and came to attack the town of Esgaroth, which had helped the group of dwarves. Bard the Bowman, alerted to Bilbo's discovery of a weakness by a thrush, slew Smaug with an arrow, ending his reign of terror over the area.