"...as he looked at the grey sea he saw only a shadow on the waters that was soon lost to the West."
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Frodo must say goodbye to his dearest friends and they must say goodbye to Frodo. Sailing into the West are also Galadriel, Celeborn and Elrond, as well as Gandalf and Bilbo.
The Elves are leaving Middle-earth as their power is waning. Since the Ring was destroyed their Rings have become useless. Their time on Middle-earth is over now and it's responsibility now lies in the hands of Men, they must look after the land, the animals and it's people and protect all from evil's return.
Bilbo and Frodo, like Gandalf, were Ring-Bearers, so they too are entitled to a place at the Grey Havens, an eternal resting place where their is no sickness or constraints of age.
As the three remaining hobbits watch the ship sail into the distance their know that their adventure is truly over, but that their friendship will last forever.