Pal Mickey is an interactive toy, and everyone has their own opinions about them, a lot of people with kids swear by them. Basically, the technology built into Pal Mickey (a transmitter/receiver, maybe?) allows Mickey to "talk" to you inside the parks, telling you about wait times for rides, reminding you that parades/shows are going to be starting, etc. He also has the ability to tell jokes, etc., so he's good for entertainment while waiting in line. Of course when you get him home, while he won't be telling you that the 3:00 parade is about to start, he will still tell jokes, stories, etc.
Current versions of Pal Mickey (dressed as a sorcerer, I believe this is version 3.0) run $65 at the parks, though sometimes you can find a gently loved one on ebay for less. You can also get "clothes" for Pal Mickey at Disney -current outfits include a pirate costume, and raingear (among others) and if you happen to be there during Christmas, a Santa outfit! Those cost about $10-12 each.
HTH!