Old Tom Bombadil is a merry fellow, Bright blue his jacket is, and his boots are yellow. None has ever caught him yet, for Tom, he is the master: His songs are the stronger songs, and his feet are faster.

As far as I know Tom is left as an enigmatic character and never explained. Just a strange encounter to make the world seem larger and more mysterious.

I can’t answer what Bombadil is in the lore of LOTR, he seems to be unique in terms of entities we are shown. But I can tell you what he is at a meta level. You see, LOTR was first told as stories to Tolkiens kids, which you probably already knew, which you may not have known, is that Bombadil was a recurring character in previous stories he had told his children. So at a meta level, Bombadil is just a fun callback to a previous character for his kids to have enjoyed.

He’s Q but it’s TLOTR

He’s a merry fellow, bright blue his jacket is and his boots are yellow.

My opinion: mostly obnoxious and good he was left out of the movie.