Like most eyespot caterpillars this caterpillar initially relies on crypsis via protective coloration. Here is the caterpillar at rest on its food plant:
Once detected or harassed the caterpillar reveals a pair of black spots and directs them towards the threat:
...and once again we meet a species where the beauty of the caterpillar far outmatches that of the relatively drab adult life stage:
The defensive behaviour of the Puss Moth caterpillar is incredibly interesting as well and is described by E. B. Poulton in his classic book "The Colous of Animals". Below is his description and inferences on the defensive behaviour of the Puss Moth caterpillar:
"The same larva assumes a terrifying attitude (mimetic of a vertebrate appearance) when disturbed"
As soon as a large larva is discovered and disturbed it withdraws its head into the first body-ring, inflating the margin, which is of a bright red colour. There are two intensely black spots on this margin in the appropriate position for eyes, and the whole appearance is that of a large flat face extending to the outer edge of the red margin (see fig. 60). The effect "is an intensely exaggerated caricature of a vertebrate face, which is probably alarming to the vertebrate enemies of the caterpillar. The terrifying effect is therefore mimetic. The movements entirely depend on tactile impressions : when touched ever so lightly a healthy larva immediately assumes the terrifying attitude, and turns so as to present its full face towards the enemy ; if touched on the other side or on the back it instantly turns its face in the appropriate direction. "
Unlike Poulton, I am not fully convinced that because the caterpillar has a pair of spots that may vaguely resemble a vertebrate face (to us) that the "terrifying effect is therefore mimetic". The important question really is whether the black spots sufficiently resemble the eyes of a predator for this caterpillar to gain protection (via mimicry) from an attacking bird.
Poulton's description of the caterpillar continues:
"Effect heightened by two pink whips"
The effect is also greatly strengthened by two pink whips which are swiftly protruded from the prongs of the fork in which the body terminates (see fig. 61). These prongs represent the 1st pair of larval legs, which have been greatly modified from their ordinary shape and use. The end of the body is at the same time curved forward over the back (generally much farther than in fig. 60), so that the pink filaments are brandished above the head. Although the filaments are no thicker than a rather coarse cotton thread, they are hollow, and contain a delicate muscle which runs through their whole length and is attached at the top. When the muscle contracts the filament is withdrawn, being turned outside in : protrusion is brought about by the pressure of the blood, which drives the filament before it. ...The appearance of the caterpillar is sufficiently alarming to human beings, and most people believe that the black marks are really eyes. Eosel was afraid to touch the larva when it assumed its terrifying attitude. Izaak Walton speaks of the black marks as ' his eyes black as jet,' in a description ..."
"The larva of Puss Moth can further defend itself by ejecting an irritant fluid"
All the defensive measures hitherto described are of a passive nature, but if further attacked the caterpillar can defend itself in a very effective manner. The lower part of the red margin below the real head of the animal is perforated by a slit-like opening (see fig. 60), leading into a gland which secretes a clear fluid. This fluid is stored up in considerable quantity and is ejected with great force when the caterpillar is irritated. The ' face' being turned towards any point at which the larva is touched, the stream is sent in the direction of the enemy. It has been long known that this fluid causes acute pain if it enters the eye. ... The secretion proved to be a mixture of formic acid and water : in a mature larva the proportion of acid is as high as forty per cent., and a twentieth of a gramme can be ejected if the caterpillar has not been irritated for some days. Half grown individuals eject nearly as much, but the fluid is weaker, containing about thirty-three to thirty-five per cent, of acid. ... So far as we know at present, no other animal secretes a fluid containing anything which approaches this percentage of strong acid.
The value of this strongly irritant liquid is sufficiently obvious. I have seen a marmoset and a lizard affected by it, and have myself twice experienced sharp pain as the result of receiving a very small quantity in the eye. Although the secretion is therefore useful as a defence against vertebrate enemies, it is probably chiefly directed against ichneumons."
When reading this account I began to wonder whether the black spots are really a poor mimic of predator eyes, or instead they - along with the pink whips - are part of a warning to attackers that the caterpillar has a formic acid spray. The "pairedness" of these spots could simply be a result of bilateral symmetry, and paired objects are likely to be more conspicuous to the vertebrate eye possibly enhancing the conspicuousness of a signal (Stevens 2005). For this species which possesses an effective chemical defence, it seems more likely to me that these spots form a part of a conspicuous warning signal which lets the attacker know that the caterpillar is chemically loaded.
Let me know what you think, click the link and add a comment below.
Aside: Interestingly, there are several other species of insects that use formic acid to defend themselves from attackers. The carabid beetle Galerita lecontei has the highest concentration of formic acid that I have seen reported (80%). This species can also aim its spray accurately towards attackers. See a full account of the chemical defence of Galerita lecontei here. Camponotus floridanus ants can also aim and spray formic acid on attackers.
Update: Here is a video showing late instar caterpillars and the adult: