The Armadillo is a relatively rare and exceedingly adorable mob that can occasionally be seen wandering aimlessly about in Desert Biomes. You don't need to fear the Armadillo -- even if it runs into you, it will not cause you any damage other than pushing you around a bit. They are friendly and harmless, if a bit clumsy.
Armadillos will occasionally drop filets, but only when killed with a steam cannon. You can increase your chances of receiving filets from Armadillos by upgrading your steam cannon; the better your weapon, the better your chances will be to receive a filet. But why would you want to kill them? They are so CUTE.