To make any Chao happy you must take care of it. In order to do so you must feed it and give it some attention. To give it attention you can either pet it or give it a toy. Chao also likes it when you take care of the garden. When weeds start to grow in you should pull them.
Just like the gardens outside your home, weeds will sometimes pop up. If this happens all you do is pull them. Just put your curser over the weed and press A. By doing this will keep that garden clean and you can see your Chao.
Chao get hungey too. You should always feed Chao or it will get mad. If Chao gets mad it may not eat and will die. Play card games to earn rings to buy fruit and nut from the store.
Tip from Tikal: Always watch Chao's mood and hunger meter. When Chao gets to hungey it will get moody. Feed it right away.