The Bunny Hood is a Vanity Item obtained by killing a Corrupt Bunny. Corrupt Bunnies are found in Corruption or when you throw Vile Powder onto a normal Bunny, which can be found randomly roaming around. They can also be found during a Blood Moon.
Utilizing the bunny statue and a 1 second timer you can build a simple multi-tier bunny trap for corrupting and killing the bunnies safely.
■The name is likely a reference to the recurring item from The Legend of Zelda.
■The design is somewhat similar to the mask Frank wears in the movie Donnie Darko or certain Splicers' Masks in the video game Bioshock.
■It is possible that the bunny hood attracts multiple bunnies to the person wearing it, however this is uncertain.