Underhill was a common family name amongst Hobbits. The Underhill Family had branches in the Shire and in Bree. In particular, there was a family of Bree-hobbits who lived in Staddle (on the east side of Bree-hill) who had that name.
When Frodo Baggins made the decision to leave the Shire with the Ring, Gandalf said that he must leave the name of "Baggins" behind and gave him the travelling name of "Underhill". This was perhaps not the best choice, for when "Mr. Underhill" arrived in Bree, there were several Underhills in the common-room at the Prancing Pony and they thought it likely that Frodo was some long-lost cousin of theirs. One of the Bree-landers, who seemed familiar with the Shire, asked where the Underhills lived and who were their relations.