"every worm has his weak spot"who said to whom and why?

Bilbo says this (actually a quote of is father's) to the dwarves just before re-entering Smaug's lair. They're angry he's made Smaug angry, and he knos that if he can get close enough (Smaug can't see him), he can find out enough to maybe butter him up and allow them all to leave safely.