The tanuki is a real animal. "Racoon dog" is from the imagination of a lazy translator who thought it better to invent a name for this animal which doesn't exist in the west, rather than leave it be. (This is similar to the practice that immigration officials used, too, forcing families to change from their real names when they came to the US.) According to Merriam Webster, the "raccoon dog" coinage only dates back to 1929.
The animal has some markings reminiscent of a raccoon -- particularly the dark rings around the eyes. Women with mascara are sometimes refered to as tanuki, particularly when they overdo it or are sloppy.
The animal in folklore is reputed to like drinking, and when several get together for an all night drinking party, they drum on their round bellies. At least one tale has the tanuki drumming too hard, and bursting its belly. They patched it with tape, and that's why many renditions of tanuki show an "x" of tape at the navel.
They're also supposed to have the ability to "bakeru" or change shape. Many of the tales involve a tanuki who's changed shape in order to trick some unwary traveler.
There's a common song about the male tanuki and his testicles, sung to the tune of "Shall We Gather By the River." It goes something like, "Ta-ta-tanuki's testicles are, swaying in the breeze, fura-fura." There are regional variations to the words, but that's the version from where I lived.
