My guess is ... it's a cocoon of a moth, or just their home until they can really morph into a moth.

I'm guessing bagworm moth, though I can't really see. They bundle bits of grass and twigs into their cocoons.

http://en.wikipedia.org/wiki/Bagworm_moth Wiki article says most species aren't a problem. My yard has the cocoons all over, like a thousand tiny christmas ornaments.

They are cocoons. Similar to those almond shaped flat brown things you see hanging, they're case-bearing moths.