I have a question. well, duh, but...o nm
Is there a religion in Middle Earth? or...does everyone just do what their ancestors did and not have a religion?
If you do not have a copy of the Silmarillion at hand, I recommend you have a plough through the first assignment in the Silmarillion Reading Discussion Group thread. This topic was discussed in great detail in that section.
A very brief answer for you is yes there is religion. There is Eru (very similar to God), and the Ainur (kind of like demi-gods, Angels etc).
The first chapter of the Silmarillion describes the creation of Ea (the world in which Middle Earth is but one continent).