To the late Ken Forsse, Teddy Ruxpin "was more than just another toy," reports Douglas Martin in a New York Times obituary (4/8/14). "It was a mythical character with a fully developed fantasy world that Mr. Forsee had been dreaming up for 30 years." He also saw his Teddy "as a way to promote values and liked to tell emotional stories about the toy." Most probably remember Teddy Ruxpin as "a plush bear that made appropriate facial expressions as it told stories or sang." (video)
Mr. Forsee accomplished this by "coming up with electronic decoders to stuff in the faux animal’s plush head. They caused the bear’s face to yawn, frown and giggle in conjunction with the words emitted by a tape cassette implanted in its back. To create the effect, he used the same technology that produces music on a phonograph record in stereo, on separate tracks. In this case, one track carried sound and one track directed facial expressions and movements."
This created a sensation back in 1985, "and it remained wildly popular through the next year. In 2003, the Toy Industry Association named it one of the most memorable and creative toys of the 20th century." Mr. Forsse created an elaborate "Tolkien-like story," for Teddy, involving a "caterpillar named Grubby," an "ancient map," a search for "magical crystals" and battles against evil forces. This was developed into a cartoon series (link), however by 1988, the company that licensed Teddy went bankrupt, leading to the toy’s quick demise.