[Nurumaiel]

Was it ever specifically stated why and how this tradition was?

I like to think that hobbits, been rather good-natured and generous, found pleasure in giving gifts to each other, so that, in oppose to a stiffer reason, the tradition was formed merely out of the goodness of their hearts. My family has taken on the tradition and at every birthday there are always 'hobbit presents' for the kids, whether it be little toys or a bag of candy, and while the kids enjoy their own presents they are always just as excited (if not more so) to give presents away. It seems to me this attitude might also apply to the hobbit.