I don't get it what is this?

i think its for everything you can put in a bag

whats a vanity pet?

vanity pets are little animals that follow u around most dont fight there ment mostly to look cool but some are rare and fun to collect theres a whole website on them (warcraftpets.com)

as of WotLK there is a tab on your character page where all your pets and mounts are kept, which i think Thott considers that tab to be a member of the item class "Bag". I s'pose it *does* contain items that used to clutter up more baglike "bags"...

AKA Kittens in a sack :D
Hunchsly Shadow council