Translation:It is happy because it has a new toy.
"Se" is more common in spoken Finnish for everyone and everything while "hän" is quite formal in most dialects. We really do call people "it" all the time and it's perfectly neutral in casual contexts.
However, if you are referring to a pet or a baby when they are present, it's fairly common to say "hän". You generally avoid saying "se" of a person who is present (obviously it gets a bit rude if you talk for someone all the time instead of letting them say what they think) but since you can't directly address someone who can't talk (yet) you can use "hän".