This of course is the way to talk to dragons, if you don't want to reveal your proper name (which is wise), and don't want to infuriate them by a flat refusal (which is also very wise). No dragon can resist the fascination of riddling talk and of wasting time trying to understand it. There was a lot here which Smaug did not understand at all (though I expect you do, since you know all about Bilbo's adventures to which he was referring), but he thought he understood enough, and he chuckled...