He's called a Puss Caterpillar or Asp. He has one of the MOST severe stings of all caterpillars! (Doesn't he look harmless and cuddly?) Here's a site with more info.
This is a good time to remind your kids (and grownups, too!) that you shouldn't pick up unidentified caterpillars! Thankfully, I was using my senses this day and told my daughter that we shouldn't touch it because some caterpillars sting. She actually almost touched it accidentally as it was on a railing, but my husband noticed it and quickly said something. So, stay away from these guys! They say its sting is worse than a bee or wasp!