This is a quote from "The Hobbit." They are real, but rarely used words. One can say that they are "made up" words, but many words in our language began as made up words (especially slang and any new terminology, such as email or Internet). Bebother and confusticate use parts of "everyday" words, so the reader can guess their meaning, just as you did. bebother = to bring trouble upon http://en.wiktionary.org/wiki/bebother confusticate = to confound or confuse http://en.wiktionary.org/wiki/confusticate

Authors sometimes make up words, especially in children's fiction, for humorous effect. As you say, the words suggest confuse and bother, but with pieces of other words added for fun.

Because they are not real words!