Cotton Monster is the creation of Jennifer Strunge. Her website is filled with an amazing cast of hand made creatures which reminds me of the Muppets with a slight touch of the Groovy Goolies. Her work shows a strong sense of imagination, and a very graphic yet charming use of color and texture. By the way you can adopt (wel purchase) one of the little devils here.
Found via Neatorama and Everlasting Blort.