This friendly looking little fellow is a Kodama - one of the rattle-headed tree spirits than inhabit the forest in Hayao Miyazaki’s “Princess Mononoke” which I watched for the first time recently. It’s an outstanding bit of anime that I’d not heard of before despite already having on DVD some of Miyazaki’s more obscure work. If you’ve seen Spirited Away or My Neighbour Totorro you’ll know what to expect. I have a copy which includes the english adaptation (edited by Neil Gaiman no less) which uses Billy Bob Thornton and Billy Crudup as voice talent, but I watched it in the original Japanese with subtitles. I’m a bit of a purist like that - I always watch films in their original language wherever possible. I find dubbed movies - even when done well - extremely offputting.
The film starts with Prince Ashitaka at the edge of his village noticing something “not human” in the forest beyond the watch towers. It is a demon - consumed by rage and hate it has come to destroy Ashitaka’s village. Ashitaka, armed with bow and arrow, and on the back of his red Elk “Yakkul” defeats the demon, but not before being cursed by its touch. The wise woman of the village explains what has happened. The demon is a boar-God from the West of the land, it has been shot, and the iron pellet inside it has driven it to this all consuming hatred.
Now cursed, Ashitaka must leave the village before he is consumed by the same rage; and the film follows his journey to the west to discover who or what is causing the imbalance in the world. This is not a cartoon with black and white answers, and obvious good or bad guys - shades of grey abound as the forces of humans, of nature, and of the nature Gods all vie for control of the bounty of the natural world.
I shan’t give any more away, suffice to say that if you have any liking of anime at all, you should definitely add this to your list of things to see!
I liked the Kodama in the film so much I’ve made the image above my MSN picture. 
Next I shall watch Grave of the Fireflies; another anime recommended by the same friend who pointed me at Princess Mononoke.
Princess Mononoke is one of the few animes I’ve seen - it is very enjoyable! Maybe I’ll look out for this Grave of the Fireflies business, then…