The bird tips. Liquid travels to the head. The bottom of the tube is no longer submerged in liquid. Vapor bubbles travel through the tube and into the head. Liquid drains from the head, displaced by the bubbles.
Fluid drains back into the abdomen, making the bird bottom-heavy.
The bird tips back up. If the bird dips into a cup of water, the fuzzy material absorbs water again and the cycle starts over. Your warm hand can cause fluid in the Dippy Bird to rise. Your body heat warms the fluid in the abdomen. The bird becomes top-heavy, and tips.