The Hobbits were a mix of human and Homo erectus.

A paper published today (Kaifu Y, Kono RT, Sutikna T, Saptomo EW, Jatmiko, Due Awe R (2015) Unique Dental Morphology of Homo floresiensis and Its Evolvotionary Implications. PLoS ONE 10(11): e0141614. doi:10.1371/journal.pone.0141614) refutes a previous paper [2] that suggested that the Hobbit of the Indonesian Flores Island was a microcephalic human. Instead it suggests that the Hobbit was a primitive human species that underwent insular dwarfism.

Above: reproduction of a Hobbit skullby Javier Truebamsf

To settle the issue of "new species" vs. "degenerate human" they took a peek at the Hobbit's teeth. And found that "H. floresiensis had primitive canine-premolar and advanced molar morphologies, a combination of dental traits unknown in any other hominin species. The primitive aspects are comparable to H. erectus from the Early Pleistocene, whereas some of the molar morphologies are more progressive even compared to those of modern humans."

Their paper disproves an even older origin (i.e. Australopithecines or H. habilis) but, and this is interesting their results suggest that " H. floresiensis derived from an earlier Asian Homo erectus population and experienced substantial body and brain size dwarfism in an isolated insular setting.".

They studied many variables and concluded that " the dental morphology of H. floresiensis is derived relative to H. habilis s. l. and is comparable to post-habilis grade Early Pleistocene Homo or H. erectus s. l. ...[giving] strong support to the hypothesis that H. floresiensis evolved from an early Javanese H. erectus population or a related form from the ancient Sundaland with substantial body and brain size dwarfism... "

The dwarfism is considerable, since an average Homo erectus is about 5.4 ft (1.65 m) tall and has a brain with 860 cm³ and the Hobbit is only 3.6 feet (1.1 m) tall and its brain is only 426 cm³.

But such insular dwarfism is not uncommon among mammals: elephants and hippopotamus that became midgets in Cyprus and mammoths that shrunk in Crete and on Flores itself, the dwarf stegodon (a relative of elephants).

Further reading
[2] Argue D, Donlon D, Groves C, Wright R. Homo floresiensis: microcephalic, pygmoid, Australopithecus, or Homo? J Hum Evol. 2006; 51: 360–374. pmid:16919706 doi: 10.1016/j.jhevol.2006.04.013

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