Ran Yakumo, the Kyuubi tail vored Youmu Kompaku and shrunk her using magic to pull her into her stomach. Youmu is a half phantom, so she has a human and a ghost form. Chen the nekomata is just playing with Myon, Youmu's phantom half. The irony of the picture is, that it's Myon that is usually eaten in fan art. And one character from the series Sanae Kochiya actually expressed a desire to eat it in the video games thinking it as marshmallow.
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