In the lore, The Hobbit and The Lord of the Rings are based on the Red Book of the Periannath—a collection of Bilbo and Frodo's adventure records mixed with various traditional tales. The setting is that the author, J.R.R. Tolkien (a linguistics professor and total language nerd), found this ancient manuscript and edited/translated it into English. So, it's supposed to be the super distant, mythological history of the world we live in. Like, 6000 years ago or something? The reason why Elves, Dwarves, and Hobbits disappeared = the era just changed.
If we look at related quotes outside the books... “As for 'myth' and history, I have merely taken it down, so to say, from the ancient records. And found them to be consistent with them by and large. There is a marked difference between The Lord of the Rings and the ancient document, Quenta Silmarillion, the latter being much harder to reduce to simple terms. I can only say that I have been deeply immersed in that long work for many years, and that it has been the main source of my private satisfaction.” - Letter 165 'I am a historical thinker. Middle-earth is not an imaginary world. The name Middle-earth (midden-erd > middel-erd, which appeared in the 13th century and is still used) is the modern form of an ancient name for the *oikoumenē* (the inhabited place of men), that is, the objectively existing world. This name is used especially in contrast to imaginary worlds (e.g., Fairy-land) or invisible worlds (e.g., Heaven or Hell). All the essential elements of that inhabited place are there (at least for the inhabitants of North-West Europe). So it feels naturally familiar, just with a little magical beautification added by the distance of time.' - Letter 183 'I have, I think, constructed a Secondary World. I did not begin with the 'goal' of becoming a 'myth-maker,' nor do I have a conscious 'mythological' relationship to the sources of my story. Rather, I delved into those sources out of the interest in the past (whether real or imaginary) that any historically inclined person naturally has, and for their own sake. Middle-earth is our world. I have placed the events in a purely imaginary (but not wholly impossible) ancient time (when, of course, the shape of the continental masses was different). But I have (generously, as is common in fiction) given all this a linguistic background, and given it a certain 'date' by making it the end of the Third Age, the coming of the Fourth Age. I only have incomplete ideas about what the Fourth Age was like, but it must certainly have been a time of decay and change, not a 'Golden Age,' but a transition, a sort of 'decline of the West,' and not a glorious 'new day.' - Letter 211
“At that time, the Third Age of Middle-earth was already long gone, and the shapes of all lands had changed since then…” - Prologue
"So wait, Sauron is Chiwoo, Sau-dong is Mordor, and he'd instantly die from a self-propelled artillery shower? Next, we discuss the geopolitical implications of the Knights of the Swan."
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