(Frodo and Sam are from The Shire, where most hobbits live.)
You reached your peak, you two must be tired.
(reaching a peak in life means you at the climax also Peak means the top of a mountain, Sam is saying they must be tired after all that climbing from their expedition.)
Our journey is to stop Sauron and greed addiction
(Frodo and Sam went to throw the ring, which causes people to get extremley greedy with it, in Mt. Doom to stop Sauron's power.)
While your journey is just for some dumb competition.
(Hillary and Norgay only made it to the top because they were in The 1953 British Mount Everest expedition, which is a competition to see who can climb to the top of Everest. This is which Sam says is dumb compared to what Frodo and Sam have climbed for.)
I'm a Hip Hop Hobbit, T-Baggin your lives!
(Hip-Hop is a type of rap, T-bagging is a term referring to the act of placing a man's genitals on someone's face. This is also a playon word for Baggins, Frodo's last name)
Mr. Frodo T-bags as much as Norgay's wives!
(Sam refers to Frodo as Mr. Frodo through the series. He also says he t-bags as much Norgay to his many wives, which Norgay has 3.)
The Mirror of Galadriel predicts your gonna be ripped
(The Mirror of Galadriel is a fountain that predicts the future. Frodo says that it predicts that Hillary and Norgay will lose because...)
For trying to outrap our Fellowship!
(...They challenged Frodo and Sam's group known as The Fellowship. This also references the title, Lord of The Rings: The Fellowship of The Ring.)
(Frodo asks Sam if he has any regret in this battle.)
Well, they fall more short than Edmund at the air force.
(Edmund was in the air force in WWII but only lasted less then a year, Sam says Hillary and Norgay's rap fall more short then that.)
Let's say we spit hot rhymes all the way from Mount Doom
(To spit hot rhymes means tough raps, this is also a word on word play from Mt. Doom as its a hot mountain.)
More deadlier than a Balrog sitting in a room.
(A Balrog is one of the most deadly creatures in LoTR, Sam says their rap is more deadly.)
We are the best of the best! We're sure to be bragging!
(Frodo and Sam say they're the best climbers.)
This Sherpa and Captain Boomerang better be Baggins.
(Sam calls Norgay a sherpa, which guids people to mountains which was his job, and he calls Hillary, Captain Boomerang, an austrailian villain in The Flash. To beg means to surrender which is word play for Frodo's last name, Baggins. Sam is saying Hillary and Norgay should start begging for mercy.)
It seems Mr. Frodo, these raps have been broken.
(Sam tells Frodo that Hillary and Norgay have rapped poorley.)
It's simple cause they got served by J.R.R. Tolkein!
(Frodo then explains to Sam that they were dominated by Frodo and Sam, who were created by author, J.R.R. Tolkein.)