Neutral Mobs should have varying behavior based on their real-life counterparts.

Currently neutral (animal) mobs act the same, but I think there are a few ways they can be changed to bring some interesting gameplay additions. Some of these would require a two new block types...known as "muddy water" which starts more translucent than water, and "ink" which is similar to muddy water but turns into water after a short time.

--Anyway, here's the behavior:

• Chickens avoid players when they get too close (run away), and when players get right up next to them they do a long jump (kind of fly) away.

• Sheep also avoid players when they get too close, but tend to move towards the nearest other sheep, if they are close by (flocking).

• Cows and sheep would both attempt to find grass where they could possibly graze (new animation needed where they lower their heads) until the grass turns to dirt after they are finished)

--New/Possible mob behavior (mobs from "Drawing Blocky Animals" by liatach)

• Cassowary/Moa avoid players by darting quickly away then stopping. A player can get close by jumping from above towards it, but this mob will become hostile

• Orangutans (or arboreals) can move through leaves from below or to the side by climbing wood, but do not fall through leaves when on top...effectively allowing them to be inside the tree leaves.

• Crocodiles could hide in "muddy water" about three deep, and when a player is near they spring towards the player to attack (much in the same way a spider does), they can jump out of water to some degree.

• Giant squid are deep-water dwellers (15+ blocks deep, perhaps?) and avoid players by darting away, much in the same way a cassowary/moa would but in a little more random of a direction, and would leave a cloud of "ink" in the water as it darts away.

• Sharks are ocean dwellers (they stay in water that has 5+ water blocks under it) and will sometimes attack humans, and they will always retaliate when attacked. They attack by charging the player, than disengaging far away from the player to a distance at which the player has a hard time seeing them, circling, then repeating the charge. They can knock players out of a boat (JAWS...maybe?).

• Whales/Narwhals are deep-water dwellers, and sometimes (rarely) they surface. Narwhals occasionally attack giant squid.

Thanks to liatach for getting my imagination going!