Animals in Buddhism are important because it helps illuminate a Buddhists relation to nature, kindness, humanistic ideas, and to further show the relationship between Buddhist theory and practice.
Buddhists see animals as sentient beings (just like humans), but intellecntually not on the same level. This does not mean, however, that animals suffer any less than humans.
In Mahayana Buddhism, animals also posses “Buddha Nature”, just like humans.
Immediately following the Buddha’s awakening, he made the following proclamation:
“Marvelous, marvelous! All sentient beings have the Tathagata’s* wisdom and virtue, but they fail to realize it because they cling to deluded thoughts and attachments.”
(* Tathagata is another name for the Buddha, and the one he most frequently used when talking about himself)
The Jataka tales often featured animals to help explain Buddhist concepts. You can see some of the Jataka tales here on Buddhanet: http://www.buddhanet.net/e-learning/buddhism/budtale1.htm
‘Bhutan Monk honors stray dog’ photo by Claus Nehmzow on Flickr (used with permission)