This is a pretty caterpillar called Leucostigma orgyia, more commonly known as the white-marked tussock moth. I picked it off a tree during the summer of 2010 and took it home to raise into a beautiful moth, as this was around the time my interest in insects was really starting to increase.
Things didn't quite go as planned.
My caterpillar friend had been parasitized! As I came to learn later, this is a pretty common occurrence, but this was the first time I had witnessed it. I cover parasitoidism in this post, but the short version is that a small wasp (in the family Braconidae) had found this caterpillar and injected some eggs into it, which later hatched and found on the insides of the caterpillar. Once the wasp larvae had their fill, they burst out of the caterpillar's body, as you can see in the above picture.
The larvae then spin their cocoons on the caterpillar's body (the caterpillar is alive for part of this process), and after a few weeks, they emerge as adults and fly away. It can be gruesome to watch, especially considering how many wasps emerged: more than 50 in this case.
The above picture shows one of the adult males, magnified under a microscope. In their normal life cycle, they would fly off in search of females to mate with to restart the cycle anew. A bit violent, but it's a great population control mechanism.