Little Cotton Rabbits makes all kinds of cute animal patterns (like the stocking ornaments), including this bear ornament. They've become very popular on Ravelry, and some knitters make rabbits, dogs, cats, sheep, or penguins by adjusting the pattern.
This is a rather quick knit; assembly is more tedious than the knitting. I made five bears - white, pink, black, and two shades of brown - and used lace for the hanging loop. The bear pictured is my favorite. The rest were donated to church.
I have to recommend Little Cotton Rabbits, because everything on the site is really wonderful. A recent post I particularly enjoyed was A Little Army. A basket full of animals - such treasures!