He apparently is mounting the toy, which isn't that unusual for fixed cats.
The procedure mainly prevents procreation and removes the uncontrollable urge to look for mates, while technically the cat is still capable to 'perform the act'.
I've found cat owners tend to be a bit reluctant to talk about the behavior, but if you ask around openly, you'll find it isn't that uncommon.
It isn't uncommon either for the behavior to start quite a while after the cat has been fixed, our 2 year old boy started about a year after he was fixed.
Our boy has his favorite blanket rolled up into a shape roughly resembling a cat :)
As with any sudden change in behavior, you should consult your vet just to be on the safe side, but it generally is nothing to be immediately concerned about.