Kumamon represents Kumamoto Prefecture which is located on the island of Kyushu, just across Shimabara Bay from Nagasaki Prefecture. When the Kyushu Shinkansen was completed a few years ago, Kumamoto Prefecture decided to create a mascot to promote tourism and trade. Kumamon was born. Kuma is the Japanese word for "bear", so naturally, Kumamon is a bear.
The character has become very popular throughout Japan. He has been such a success that he brought in over US$1.25 Billion in just two years!
Here is a video song about Kumamon with English subtitles. It was filmed at Kumamoto Castle - one of the three best castles in Japan. Warning: possible "cute" overdose. :)