In a sentence: The Silmarilliion is the Bible of Middle-earth. Like the Bible, it's so incredibly easy to get lost in the chains of "so-and-so begat so-and-so and so-and-so," etc., on and on and on. The stories in the Silmarillion are beautiful and complex, probably more so than the Lord of the Rings, but the writing is so dense that it is highly unlikely ever to reach the popularity of The Lord of the Rings and The Hobbit.
That being said, I personally like The Silmarillion, especially the story of Turin.
Answer by Caleb Woodbridge, writer and SEO consultant:
Lord of the Rings and The Hobbit are broadly speaking novels: they're written in a modern genre that most readers are familiar with. The Silmarillion, however, is written in pre-modern genres, those of myth and family saga, such as the Norse Eddas and sagas, or some of the Old Testament narratives.
In the novel, the basic focus is on individual characters, and it has one main overarching plot (however large and intricate, as in Lord of the Rings). This is connected with the individualistic character of modern Western culture.
The Silmarillion on the other hand, is a collection or cycle of myths and stories: It doesn't form one big story, but is a lot of connected stories. Also, it takes as the focus of the storytelling the family or tribe, not the individual (though it may focus on individual stories as part of the larger pattern). Premodern Western culture tended to be much more collectivist, and this reflects that.
Understanding the stories in The Silmarillion involves paying attention not just to the individual characters, but remembering where they stand in relation to their family history, inter-familial feuds or friendships, and so on. It is usually these, rather than internal psychology and motivation, which explain the characters' actions.
If you want to really get the most out of reading The Silmarillion, it may help to draw your own family tree as you go along! Learning to read an unfamiliar genre is a bit like learning a new language: it always takes time and effort, but once you've learned it, it opens up whole new worlds to you.
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