Well, I guess I knew we'd have to have this talk eventually. We'll try to approach this objectively.

A furry is a loose term commonly used to define an individual who tends to feel that they identify better with anthropomorphic animals than with humans. This is a rather common condition on the internet and is most openly displayed in the form of "characters" or "toons" representing their own furry identity, and the associated artwork for that toon. In real life and at Dragon*Con, it is also often displayed through the wearing of things like tails that clip to one's belt, animal ears attached to a headband, etc. (which is not to say that such accouterments are universally indicative of a furry). In general, while non-furry individuals find this to be a tad weird, it's harmless enough.

Many furries will also take this to the next extreme, which is sexual activity in character. Furries will refer to this sort of sex as "yiffing", as that's the noise that foxes make as they have sex (apparently).

There's also another extreme beyond that, which is fursuiting. Some furries will go so far as to have a fursuit (think of characters like Mickey Mouse at a theme park... that kind of suit, but not such a specific character) and go out in public as such. And some will go to the extreme beyond that, which consists of having strategic holes placed in the fursuit. Holes that allow for sexual activity, that is to say.

In a slightly different direction than fursuiting is a subscene of "Plushies", individuals who will modify stuffed animals for the purposes of having sex with them.

Reactions to furries amongst the non-furry tends to range from confusion or fear (for those inexperienced with furries) to disgust or threatening behavior (for those who are especially freaked out by them) to bemusement (for those who recognize that they're harmless and rather silly). Because they are more open with their furry identity at Dragon*Con, many first-timers end up learning about the subculture each year.

The best course of action is to leave them alone. If someone in a fursuit with holes in it approaches you in a manner you find inappropriate, kick it in the balls and run.

See Also:

Costuming at DragonCon

Fanspotting Field Guide