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A pet is an animal kept for companionship and enjoyment, as opposed to livestock, laboratory animals, working animals or sport animals, etc who are kept for economic reasons or to perform specific jobs. The most popular pets are noted for their loyal or playful characteristics, for their attractive appearance, for their song. Pets generally seem to provide their owners with non-trivial health benefits; keeping pets has been shown to help remove stress.  There is now a medically approved class of 'therapy animals', mostly dogs, who are brought to visit confined humans (some illnesses, age related disabilities, etc). Walking a dog can also provide its owner (as well as the dog) with exercise, fresh air, and social.
While in theory any animal might be a pet, in practice, only a small number of species of mammals, especially dogs and cats, and other small animals, such as birds, are practical for several reasons. Fish have joined them more recently. Aside from the obvious (eg, elephants being unsuited for small apartments), which species are suited for being pets is less easy to understand.
One answer seems to be that a pet must either be so small or easily controlled that its own behavioral tendencies are irrelevant, or the animal must be actually domesticable. Examples of the former are such things as fish (eg, small ones, even including carnivorous ones such as piranha), or small reptiles.
A few animals are capable of adapting to human requirements sufficiently closely as to be said to be domesticable. Dogs are the classic example of domesticated animals normally suited to being pets. The domestic dog is quite similar to the wolf (from which they are descended, as established by genetic analysis), but their physical form and behavior are characteristically different than wild wolves, more than because of mere differences in size and coat and coloring. Typically, this involves a changes in head and eye shape, likely because this is more appealing to humans (an extreme example of this is the appearance of nearly all stuffed animals (e.g. Teddy Bears or the fictional Ewoks of the Star Wars movies). On the behavioral side, characteristic domestic changes in dogs include what is, in effect, a prolonged infancy, and oddly, barking. Wolves are far less playful and don't bark, but a very long term Russian project bred foxes for a few generations from captive wild animals and got barking foxes rather unexpectedly. Domestic cats appear to be less changed by their association with humans (again, aside from coloration and fur issues) in comparison.