^_^ is the
Japanese equivalent of the
emoticon :). It borrows its form from the
insipid little curved eyes that
anime and
manga characters develop when they're
happy. While many
torendii people in Japan use these kind of emotes, the only people who really use them widely in
Latin-based text are anime fans.
Japanese emoticons tend to follow ^_^'s right side up format, mainly because the wide variety of extra characters available on Japanese codepages (maru, batsu, kanji, etc.) make it possible to draw all sorts of interesting shapes that can't be made in plain ASCII. One example of an unorthodox JIS emoticon:(◎々◎) (if you can't read it, try it on a Unicode-compatible browser). Check out the Japanese Smileys node for several that can be rendered on Latin codepages.
The opposite of ^_^ is -_- ... which can be intensified by lengthening the underscore that forms its mouth, like this: -_____-