Peter Jackson previously signed on as an executive producer (the same role that, comparatively, George Lucas served on Episodes 5 and 6 of Star Wars); The main reasoning appeared to be timetable conflicts with other directing commitments Jackson already had or has made (The Lovely Bones, Tintin). The fact that Jackson was in a financial conflict with New Line Cinema at the time may have also played a role. There may also be the matter that the previous Lord of the Rings movies are hugely popular movies. This will raise the expectations for The Hobbit considerably, while the novel is in many regards (e.g. story structure) quite similar to the Ring-trilogy, which has also become much more popular than the Hobbit over the years. With Peter Jackson at the helm, expectations will likely rise to unrealistic proportions. This could lead to potential mass disappointment with the fan base, arguably comparable to when George Lucas decided to create his prequel trilogy to the original Star Wars trilogy himself, and when Steven Spielberg created a fourth Indiana Jones movie after nearly twenty years. Jackson himself also experienced first-hand how high expectations can get when he is listed as director, having met with some harsh criticism for his post-LotR movies (King Kong, The Lovely Bones). However, since del Toro left the project and the financial conflict with New Line Cinema was settled, Peter Jackson expressed willingness to step in as director. Moreover, he was "available" due to the delays in production. He has directed all three films (it is now a confirmed Trilogy) with shooting started in February 2011. Peter Jackson, Fran Walsh and Philippa Boyens, who all wrote the previous Rings Trilogy, have written the screenplay for The Hobbit Parts 1, 2 and 3. The movie has been split into three parts with added expanded content from the book (i.e. drawing story elements from the Appendices, see below), it is clear that the maker's intentions for this film go beyond a mere introductory prequel. We can expect The Hobbit: An Unexpected Journey on December 14, 2012 followed by The Hobbit: The Desolation of Smaug December 13, 2013 and The Hobbit: There and Back Again on December 17th, 2014. The choice to extend the single relatively small, 297 (paperback) book was allegedly Peter Jackson's and he claims it is due to the sheer amount of content in the expanded universe, so that the story can be told in its entirety, as well as fan service, though there have been valid claims that the huge financial investment and potential profits were a factor in the final choice. This, of course, is only speculation.
The complete explanation for why Jackson did not direct these films in provided at the beginning of Disk 7 Special Features of the directors cut. They discuss it with the original director and with Jackson. They began working on the Hobbit before Warner Brothers and MGM had worked out their shared ownership rights to this film. This dragged on for months. Finally, when a solution seemed distant del Toro had a chance to direct another film and he took it. This left The Hobbit with no director. Shortly, the issue between studios was worked out and the casting director went to Jackson and told him she could begin casting the film without a director. That's is what Jackson stepped into the roll...5 months before the cameras started rolling. He realized that probably no one else could seamlessly step into the roll and make it work. The entire creative team agreed.