it was gray, furry, and about my size. It was sitting upright, eating nuts with it's front paws!

I also saw it had been burring nuts by one of my play trees (ok all the trees are my play trees). I looked at daddy, who said it was a squirrel. I looked at the squirrel, then at daddy, then back at the squirrel. This tree isn't big enough for both of us.
I moved towards the tree, and then so did the squirrel. Hmm wasn't expecting that, so I went behind daddys legs to make sure he was ok and that I was going to protect him from back there. Daddy laughed and we went on our way.
Next time squirrel, you won't be laughing, me'll bite your furry bum !!