I think that it's basically an inside joke. I don't know, as I only vaguely know that Vtuber by name, but I think it's a joke in her stream chat, about where does her tail go. Like a common question asked. I suspect that she jokingly said "up my butt!" and thus the dragontail butt plug was born. And so, as all good salespeople do, when something hits that hard in your fanbase, she made a plushy of it. She probably made it a plushy, so that she didn't have to deal with all the legality of actually selling a sex toy, as there are lots of restrictions for promotion of those products, like on Youtube/Twitch for example. Like I remember seeing a stream from JoCat, where he was playing...I think it was Worms, with friends, and they were doing sponsor plugs for their different channels, and one of them said something like "I'd really like to say I'm sponsored by Dragaon Tongue, but I can't" because the company sells dildos of various reptilian designs, and are super popular. But, Twitch doesn't let them promote sex stuff. Or at least they can't show imagery of the product, or the name of the company. So they got into a debate about how they could, within the rules, still promote it.
So, it's a plushy "butt plug" of the dragon tail. Basically, it seems to be an inside joke, made into a toy. It's not a sexy toy, but it's a joke about a sex toy.
