I first saw this movie when I was about four, and it has influenced the way I have felt about Tolkien for years and years and years. Yes, it has flaws - huge gaping flaws. Some of the plot lines aren't at all what they are in the book, and you jump into the end of the story and have absolutely no idea what went on before. It features the phial of Galadriel, for example, but doesn't mention who Galadriel is or how he got the phial in the first place.
But when you're four years old, what does that matter? For me, at least, it was a nice little introduction into Tolkien's epic trilogy. For parents out there, I won't lie to you - there are scary parts. I don't really remember being freaked out about it, though. Some kids might. Little boys will love it because of all the battle scenes, and little girls will love it because of Eowyn.
The scene with Eowyn and the ringwraith is very well done, in my opinion. Not completely like it was in the book, but very well done just the same. It shows us women that you can be beautiful and feminine and still kick some major butt.
Also the scene in which Sam is tempted by the ring is extremely dramatic. I'm glad that Sean Astin's performance more closely resembles this Sam rather than the 1978 Ralph Bakshi Sam. Sam is a loyal trustworthy friend who won't let people push him around without a fight, and not a gay lover.
So with all this in mind, I'd say that this movie is good for all ages. Adults who are fans of the book should see it, even if just for the sake of seeing it. I think it's more appropriate for children, though,to get them acquainted with Tolkien's work.