By demonstrating humanity's flaws, foibles, and virtues as exhibited by animals, stories that feature anthropomorphized characters-- that is, talking animals-- can provide readers with a greater understanding of human psychology and behavior. Animals and animal characters are particularly appealing to children because of their charming appearances and non-threatening natures. Youngsters may often find it easier to relate to animals than to humans1, and so more readily empathize with anthropomorphic characters.
The publishing world, like any vehicle subject to the vagaries of public interest and fashion, goes through cycles of thematic interest and popularity. A U.S. study in the 1980s revealed that three out of four stories written for children featured animals, either as main characters or about them2. However, in the 1990s, it was commonly accepted that children's stories with talking animal were anathema to editors and publishers-- a surefire way to get tossed into the "rejected" pile.
Now, as we advance into the second half of the first decade of the 21st century, agents and publishers still aren't clamoring to publicize an interest in conferring cats or back-talking bunnies, but a trip to your local bookstore will show that there's been a definite resurgence in the popularity of new children's works that feature chatting critters. Further indication of the rise in popularity of anthropomorphic animals can be seen in the movies aimed at kids such as the recent big screen adaptation of The Lion, the Witch, and the Wardrobe, C. S. Lewis's classic novel which prominently features talking animals, as well as the string of animated movies with conversing animal protagonists (e.g. Happy Feet, Flushed Away, Over the Hedge, Madagascar). But even before this revival, many, major children's magazine markets such as Spider, Highlights and Turtle have been consistently receptive to talking animal stories.
Talking animals, regardless of their current or past literary popularity or lack thereof have had a long and distinguished history in both children's and adult storytelling. Typically, stories that feature talking animals portray these characters with human attitudes and thoughts, anxieties and troubles. This category of narrative is far from being a new or exclusively Western construct. Creation myths and folklore from the world over are rife with animals and people communicating in a common language as well as animals taking on the role of surrogate human-- often in didactic morality tales-- in a human-like society. Intended as instructional tales for both children and adults, talking animals and folklore in general only became the exclusive domain of children's literature in modern times.
Writers for young readers should be aware that while talking animals are no longer taboo, many editors and publishers remain dubious when confronted with a manuscript that stars anthropomorphic beasties. They've been glutted by badly-written stories featuring saccharine fuzzy characters with twee names. As with any well-known trope, in order to stand out from the slush pile, a story needs to excel in originality. And, despite what many novice writers believe, talking animals are hard to write well.
One of the most common mistakes beginning writers make is overdoing the cuteness. Animals, by their nature, are endearing enough. They don't need alliterative names or syrupy behaviorisms to be appealing. Cute animals have become a source of popular spoofing (e.g. the Happy Bunny books and franchise by Jim Benton), and even young children are sophisticated enough to find an overabundance of precious mannerisms off-putting.
Animal characters do, however, need to be three-dimensional and interesting, as much as, or even more than, human characters. Their motivations and personalities must be well-developed in order to engage readers and catch the attention of editors, and they must encounter and overcome believable obstacles in the same way a first-rate human protagonist must.
It also pays to know your audience. Publications targeting younger readers-- picture books and early readers-- often favor animal characters that are essentially proxy humans. Furry protagonists live with their families in suburban houses, squabble with their siblings, and ride buses to get to school. These characters have little in common with real animals aside from their external appearances.
Stories like these maintain accessibility to young readers while allowing the characters to engage in everyday as well as grown-up activities such as going to work and shopping at the grocery story. While adults or sophisticated "children," these animals, by virtue of their non-human characteristics, can still exhibit childlike emotions and behaviors. Also, the more human-like the animals are, the less desirable it is to include human characters as it strains the illusion.
In something of a behavioral continuum, the more real animal traits that anthropomorphic characters have, the older the intended audience tends to be. Animals who are mostly human except for a few choice elements of their animal nature-- e.g. they don't wear clothes, but they do watch T.V.-- are popular in fiction aimed at youngsters who have progressed past the picture book age and into the realm of chapter books and middle-grade novels. Likewise, works that feature animal characters who are in most ways true to their animal natures save for their ability to talk, are usually reserved for the older, YA crowd. These stories are also characterized by their richness in setting, lending verisimilitude to the juxtaposition of fantasy and reality.
Of course, there are always exceptions to these trends, but it's a wise writer who knows what editors expect and look for.