Ok as condensed as possible...
The whole reason Frodo leaves with the elves is because when he returns to the shire it has changed, and he can't go back to his old way of life. What ends up taking the second half of the book is really Aragorn's wedding, the whole return home, scouring of the shire, and wrap-up with Sam becoming mayor etc etc...
What happens in short is: men, under the command of "Sharky" take over the Shire. When the hobbits return they find that they are not allowed in, and that there's a whole system of sherrifs and whatnot that have made up a whole long list of "rules". And essentially life pretty much sucks.
Turns out that Sharky is Saruman. Treebeard had let him go from the tower (in the books, Gandalf breaks Saruman's staff and he is thereafter deemed powerless. Saruman's true inate power in the books is a persuasive voice like that seen in Grima wormtongue, which he retains to a lessened extent.) He decided to go to the Shire, mostly to make Frodo's life miserable because he can (at least, that's the impression given). So the hobbits, two of whom are quite large compared to normal hobbits from drinking the ent's drink (which isn't in the normal versions of the movies at all), proceed to retake the Shire. Grima it turns out is still Saruman's assistant, and at the very end when insulted by Saruman after the hobbits have reclaimed the Shire, kills him in a fit of rage and then gets shot by hobbits himself.
This all really takes up quite a bit of real estate page-wise. It is interesting, in context of the rest of the story, because it wraps up the story with a much less "hollywood" ending, and serves to reinforce the point that one can never go back to an old way of life. Without it, Frodo's departure seems contrived, if it makes any sense at all.
Anyway, that is a very condensed and butchered recount of what happens.
