File:The Hobbit An Unexpected Journey Extended Edition - Thranduil in Erebor

Description
Thranduil pays homage to the Heart of the Mountain in the Dwarf Kingdom of Erebor.

Extended clip from The Hobbit: An Unexpected Journey

Explanation:

In the First Age, the Elven King Thingol, summoned the Dwarves of Belegost to create him jewellery from the treasure from Nargothrond. The greatest of these works was the Nauglamir. Thingol treasured it above all else but the Silmaril of Beren and Luthien. When the smiths from Belegost completed their work, Thingol then summoned the Dwarves of Nogrod to set the Silmaril in the Nauglamir. The Nauglamir, now bearing the Silmaril was the most beautiful object in Middle-earth.

The dwarves were captivated by it's beauty and greedy for the Silmaril, so they demanded the Nauglamir as payment for their work. Thingol was unwilling to hand over the necklace, and sent the Dwarves away without payment. In their anger, the Dwarves slew Thingol and went back to their city where they told a much different story, which persuaded the King of Nogrod to march upon Doriath and sack the city. They took the Silmaril and other treasures from Doriath, but they were slain on their way back to Nogrod by Green Elves and Ents, led by Beren. They reclaimed the Silmaril.

These events are what Bilbo is referring to. Also, these events are what caused much of the strife between the Dwarves and Elves.