The Moon rabbit in folklore is a rabbit that lives on the moon, based on pareidolia that identifies the markings of the moon as a rabbit. The story exists in many cultures, particularly in East Asian folklore, where it is seen pounding in a mortar and pestle.^[1][2] In Chinese folklore, it is often portrayed as a companion of the moon goddess Chang'e, constantly pounding the elixir of life for her; but in Japanese and Korean versions it is just pounding the ingredients for rice cake.

Folklore

In the Buddhist Śaśajâtaka (Jataka Tale 316), a monkey, an otter, a jackal, and a rabbit resolved to practice charity on the day of the full moon (Uposatha), believing a demonstration of great virtue would earn a great reward.

When an old man begged for food, the monkey gathered fruits from the trees and the otter collected fish, while the jackal wrongfully pilfered a lizard and a pot of milk-curd. The rabbit, who knew only how to gather grass, instead offered its own body, throwing itself into a fire the man had built. The rabbit, however, was not burnt. The old man revealed himself to be Śakra and, touched by the rabbit's virtue, drew the likeness of the rabbit on the moon for all to see. It is said the lunar image is still draped in the smoke that rose when the rabbit cast itself into the fire.

http://en.wikipedia.org/wiki/Moon_rabbit