He marks the transition between the world of _The Hobbit_ and that of the new world without magic which _The Lord of the Ring_ presages --- c.f., Lord Dunsany's _The Charwoman's Shadow_ which JRRT certainly had in the back of his mind as the manuscript grew from "Hobbit Sequel" (w/ a Hobbit named "Trotter" as the first iteration of the Ranger named "Strider" whose name in Eldar is not so ill, _Telcontar_).

Moreover, his removal dismisses and reduces the work of the unnamed smith who wrought the blade of Westernesse whose work came to fruition in its small part in the undoing of the Witch King of Angmar to a mere clattering of cutlery on a bed in a Bree.

A better way to handle it would've been a fade to black as the Hobbits pass into The Old Forest, and their then awaking on a hill w/ swords menacingly arrayed around them (across their neck would be a bit much w/o someone to actively remove them), some jewelry glittering on a nearby stump, their ponies neatly tied up nearby, and a song fading off into the distance as a man in bright blue jacket, leather pants, yellow boots, and a hat w/ a feather in it rode into the Old Forest.