Puns. This is why i'm always laughing at parts in chinese movies that don't seem funny in the subtitles. That and the subtitles lie to you.

Since its first unheralded appearance in January on a Chinese Web page, the grass-mud horse has become nothing less than a phenomenon.

A YouTube children's song about the beast has drawn nearly 1.4 million viewers. A grass-mud horse cartoon has logged a quarter million more views. A nature documentary on its habits attracted 180,000 more. Stores are selling grass-mud horse dolls. Chinese intellectuals are writing treatises on the grass-mud horse's social importance. The story of the grass-mud horse's struggle against the evil river crab has spread far and wide across the Chinese online community.

Not bad for a mythical creature whose name, in Chinese, sounds very much like an especially vile obscenity. Which is precisely the point.

The grass-mud horse is an example of something that, in China's authoritarian system, passes as subversive behavior. Conceived as an impish protest against censorship, the foul-named little horse has not merely made government censors look ridiculous, although it has surely done that.

It has also raised real questions about China's ability to stanch the flow of information over the Internet -- a project on which the Chinese government already has expended untold riches, and written countless software algorithms to weed deviant thought from the world's largest cyber-community.

Link

Here's a translation of the lyrics i found online:

There is a herd of Grass Mud Horses*
In the wild and beautiful Ma Le Desert**
They are lively and intelligent
They are fun-loving and nimble
They live freely in the Ma Le Desert
They are courageous, tenacious, and overcome the difficult environment

Oh lying down Grass Mud Horse
Oh running wild Grass Mud Horse
They defeated river crabs*** in order to protect their grass land
River crabs forever disappeared from Ma Le Desert