From the artist's blog:
Most of the movements, the strumming, head turning, and banjo movement are controlled by a bunch of cams on the crankshaft. I had some extra room on the crank so I added the little bird. I wasn't sure how it would turn out, but I think its popping up and down makes me smile the most. Inside I built a little music box called a Kalimba, or thumb piano. It's not terribly loud or "banjo" sounding, but I did tune it to real notes and everything and it plays. I hope you like it.
Like it? Yes, indeed!
Here's a link to the Banjo Pig page on Guy Francis's blog.