To me the best character in The Lord of The Rings is Gollum. Gollum is amazing because of his duel nature, his battle between temptation/evil/fear and humanity/good.He shows that one cannot serve two masters, something he consistently attempts to do (his masters being Frodo and the Ring).
Before Golum existed, he was Smeagol, a hobbit living near the Shire. We do not know if Smeagol was already corrupt before the Ring entered his life, but he certainly became so quickly. In the first few minutes of just seeing the Ring, Smeagol kills his best friend in order to steal it.
As the Ring corrupts him more and more, Smeagol must enter the mountains in order to get out of the light. Over the span of hundreds of years Smeagol transforms into Golum, a creature that is very corrupt and has little chance of returning to his past mentality/humanity. Perhaps not even humanity, but hobbity, seeing that hobbits are much better natured then man.
Gollum lives in solitude, until Bilbo Baggins disturbs him in his cave. Bilbo steals the Ring that "ran" away from Gollum. Afterwards, Gollum reveals who took the Ring after extensive torture. Soon later, he, himself, escapes his prison in search of the Ring himself. By this time Bilbo has passed the Ring to Frodo, his adopted son.
In the second movie Gollum makes contact with Frodo and Sam, while they are on their way to Mordor in attempts to destroy the Ring. Frodo saves Gollum from Sam, and in return Gollum see's Frodo as his master. This sets up Gollum's internal conflict throughout the rest of the second movie.
Gollum is caught between two very different powers, one to protect and guide to one who saved his life (Frodo), and the other to kill who stands in the way of him getting back the Ring (again, Frodo). I think you can see how these two agendas can be problematic to Gollums psyche.
Now Gollum is surprisingly strong minded and able to resist the temptation of the Ring for a very long time. Perhaps this is because of his guilt from when he killed his best friend when he was still a hobbit. It is also very interesting that the creatures that seem to be able to resist the Ring the most are hobbits. Repeatedly other races are unable to resist the Ring, there are many examples of men falling to the Ring and even Gandalf, a great wizard, does no trust himself to bear the Ring.
Although Gollum is able to resist killing Frodo, this is about the only thing he can do. For him the temptation to kill Frodo is always there. This makes me love Gollum even more, he is continuously fighting in order to do what he believes is best, in order to keep Smeagol alive.
I think that the best scene in The Lord of The Rings is when Smeagol triumphs over Gollum. This scene is so important because it shows that good can actually triumph over evil!!
Unfortunately, Smeagol's evolution does not change here. While Smeagol is in control of himself, he is a great friend to Frodo and Sam. You can see that he has a much better/positive outlook on the future.
After this "betrayal" Gollum returns and Smeagol unfortunately allows Gollum to take over. The Smeagol part of Gollum dies, and the evolution of Gollums character ends... In turn, this explains Gollums actions in the third movie. He betrays Frodo, by getting rid of Sam and leading Frodo to Shelob's lair. Also Gollum attacks Frodo at near the end of the journey at Mount Doom, bites Frodo's finger off, gets the ring and then falls into the volcano destroying both himself and the Ring...