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The tanuki is a medium-sized canid (a member of the dog family), limited in range to eastern Asia until human introduction to Europe in the 1900s. The scientific name is Nyctereutes procyonoides, which means "raccoon-like night-walker." The name is quite apt for both habits and appearance.
They are perhaps one of the most well-known animals in Japanese folklore, and thought to be possessed of the ability to change shape. Generally they are interested in carousing, and often depicted carrying a jug of sake over one shoulder, and their shape-shifting activities are generally designed to have fun, discomfit others, and obtain something good to eat or drink. If injury or damage should result, they are generally often to make amends and are quite sorry, at least until they forget and then try something else.
In fact, while they are of course not the intelligent beasts portrayed in Japanese story, they are fun-loving, mischievous, nocturnal animals often encountered in forested regions. They have a healthy dislike to people and cars, but have discovered that a variety of interesting and tasty things can be found in garbage cans, so they are relatively common around houses located near forest areas.
In addition to sensing edibles in garbage cans, they can also sense raw power. Whether this POW is generated by a player, an NPC, an invasion from Somewhere Else, or merely a natural leakage from the Other Side (or Dreamlands), they can sense it and will often react. A skilled observer will be able to judge the intensity, direction and duration of the POW emission, and often even gather information as to its source.
Tanuki do not like Mythos creatures, and react to POW released by Mythos creatures or leakage from Mythos-related sites as if it were a bad smell. They will act obviously unhappy, often freezing and looking for potential enemies, hiding, and avoiding moving around outside as much as possible. If the source is unusually strong or close, they will move away from it, occasionally even in daylight.
If the source of the POW is anti-Mythos or neutral (for example, a leak from Dreamlands), tanuki are attracted to it. Recognizing somehow that it will not (intentionally) hurt them, their curiosity fires up, and off they trot to investigate. After all, even if it's not edible, it smells like fun. It is not immediately clear what they actually get out of it, because in fact POW cannot be eaten or even touched.
What happens, however, is that the tanuki can often build up charges, similar to static charges, of collected POW. Usually this will leak off into the surrounding reality gradually, but in rare cases (and especially when large amounts of POW are involved), it can instead arc off like lightning strikes, causing a variety of unusual and often bizarre effects on whatever it grounds to. It is this phenomenon that gave the tanuki their reputation for being able to change their appearance. A charged tanuki frequently emits a sound like the wind blowing through leaves, while an arc effect is usually transformation, but it could also include opening gates and other less-common phenomena.
On full moons, when magic is traditionally stronger, the tanuki can often be seen playing in an open field… while human eyes cannot detect anything, in fact there is a POW leakage there, and the tanuki are enjoying it, perhaps charging themselves up for a surprising discharge into onlooking players.
It has been suggested that the tanuki, when they dream, are Zoogs, but no-one has been able to tell. Randolph Carter would perhaps know, if he could be persuaded to talk about them.
The Taininhodo aid and support the tanuki around Mt. Iwate, and have fed and protected them for centuries. In fact, they have a monk named the "Keeper of the Tanuki" specifically for this purpose. The Keeper puts out food when it is needed, provides medical aid when they are injured, discourages natural predators (especially dogs) from entering the area, and above all observes them to see what their actions indicate about POW activity in the region.
The tanuki enabled the Taininhodo to discover the thinner wall between reality and the Dreamlands located in the Abbott's study, and on several occasions warned of increasing Chthonian activity in time for the monks to do something about it.
Much of the region around Mt. Iwate is forested, with nature reserves and a (rarely-used) JSDF test range nearby. An observant player will notice animal feed set out in dishes, and perhaps tanuki droppings here and there. He might also notice the Keeper actually playing with tanuki, scratching their bellies and noses. When asked, the Keeper will comment that he loves the animals and merely takes care of them for that reason, but in several places around the temple grounds are statues of tanuki, or small monuments to specific tanuki that died decades or centuries ago, erected by the monks that cared for them. These scattered monuments and statues are highly unusual, even in Japan, and any Japanese who actually stopped to think about them would agree. They do not stand out, though, and most visitors pass them by without thinking twice.