This is Happy. He's a Sponge Octopus and he's been hanging around my house for a few years. Over that time his smile has become a little more sarcastic, perhaps he too has grown wise to the world?
He was another find from Crazy Clark's. I found him perched upon an island of washing powder happily unaware of his miss-categorization. He also seemed to be waiting for me, like Grover had, but first I had to check to see if this Sponge Octopus was the best Sponge Octopus I could buy. I found the Sponge Octopus isle and proceeded to check each Sponge Octopus in turn; inspecting interesting eye orientation, mouth twisting and leg length. As it turns out my Sponge Octopus of the Island of "Surf" was indeed the most handsome of the entire species. I popped him in my red plastic basket and headed for the teen at the checkout.
Happy has never actually been used as a sponge as he is allergic to water, I hear pure-breeds have such peculiarities, and so his precarious placement by the bath has him a little perplexed - which could explain his expression.