Well, it was like lord of dor-lomin said. But also, Bilbo was officially Frodo's cousin. But when Bilbo 'adopted' Frodo, it was like Bilbo became Frodo's dad. But if you were cousins, it would sound wierd calling each other father/son. So, it was uncle/nephew. Uncle's can have very fatherly qualities to them, but it also means they are not the father. And it has to do with age too. I have cousins who are about 20 years older than me. We call each other uncle/nephew because it seems better like that.
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-Willie
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