So far, I have watched the actor commentary and disc one of The Making Of. It is absolutely fascinating. About a year before shooting began, Peter Jackson brought two renowned LOTR concept artists, Alan Lee and John Howe, onboard to visualize the look of the film. It is incredible the amount of detail went into creating every item you see on the screen. Everything was designed specifically for each culture. For example, the Dwarves architecture, weaponry, and clothing is very angular and geometric, while the Elves have much more rounded, softer designs. Here are some of Alan Lee's works (keep in mind, these were created before the artists even knew there was going to be a movie):
And John Howe's:
Both artists said that the hardest thing was establishing a sense of history in Middle Earth. Each species had been around for thousands of years and had a strong sense of cultural pride. How do you portray that in other ways than just making things look old and used? I think this is why the movie turned out so well: because they took the time to think of these things and put in enough time and effort to make everything look as authentic as possible, so you could really believe you were there. That, and the fact that Peter Jackson gathered all the biggest LOTR nerds in the world to help make it happen.
(photos collected from thedigitalbits, tolkiengateway, and john-howe)