[Eönwë]

In regards to non-Elvish humans having a lack of "innate power" or ability, I feel obligated to bring up the Drúedain.

In response to the actual discussion, I'd say 'magic' in Middle-Earth is more of a combination of innate power and skill/fulfilment of the innate ability.

As an example, the Noldor seem to have an innate propensity towards crafting and creating objects of beauty. However, under the tutelage of Aulë, Fëanor can create the Silmarils, and as such is counted as the greatest craftsman of all time. He is naturally high in the hierarchy of the Noldor, which generally seems to suggest more innate ability (whether it is this that makes them the rulers or the other way around I'm not sure), it is only under the skill and experience of the Valar that Fëanor reach the pinnacle of Elvish craftsmanship. And so I'd say that you need both the natural born ability as well as the learning of the craft to create 'magic' of some sort. Celembrimbor was skilled, but it was only with the knowledge that Sauron gave him that he could create the rings of power. It's not that he wasn't capable of it, it's just that he didn't know how.

Of course, if you look at the Teleri, it's clearer- those that went closer to the West are more influenced by the Valar, and so have greater ability. And sometimes it seems that it is not even knowledge, but just the "light of the two trees" and being among the Valinorean Ainur that increases the 'magical abilities' of the character, and I suppose this just counts as a 'positive side effect' of being in or nearer to Valinor. However, I'd suggest that it follows the same principles, and that a human who goes to Valinor will never be as 'magical' as an Elf who goes to Valinor, just because of their nature- the Elves are tied to Arda, and so can manipulate it and are more 'in-tune' with it, while the humans are more distant, and so rely on their own ingenuity. And often this involves being at discord with nature, for example factories/industry, which mirrors the similar attributes of the schemes of the great discordants, Melkor and all those who followed him (even indirectly, like Saruman). And I think this is what separates it from 'magic'. Magic is more the manipulation of nature in accordance with nature and the Music, while technology is the manipulation of nature while going against its natural state.

I'd say that for the Valar and Maiar, their power is almost totally innate, as they created Eä, and so understand it at the fundamental level. This also means, however, that they can go against it at this level, as in the case of Melkor. Elves are quite in touch with the earth, but obviously, they are still not truly eternal like the Ainur (they get born etc.), and so naturally have to grow up, and don't just have their full 'magical' capability from birth. And going to Valinor helps. Humankind doesn't generally have that much natural power other than the "ordinary everyday sort" (what he says about Hobbits, which count as a type of human). Obviously, they have the Gift, and so can die and are possibly able to have more free will, but I don't know if that counts as magic. Or maybe that's actually what means that they have less magic, as they are less connected to the world (as I mentioned in the previous paragraph). And remember, Denethor doesn't have much Elf in him at all, but he can still control the Palantír. And as SpM said, the Shire has its own sort of peaceful, good magic, and its inhabitants are quite close to nature.

So, in summary, you need to have the innate ability to perform magic (which everyone in Middle-Earth seems to have to certain extent, and with a certain style), but you also need to learn (either through being taught or by yourself, the hard way) how to use it to its full potential. It also related to how close you are to nature, which could explain why someone like Tom Bombadil (who is very linked to nature), is so powerful.