There's a couple other videos of Yellow Drum Machine here on the sift, but this is the longest one. It shows more of what he does. You may notice occasionally it sounds like there is a background beat, but it's got a microphone and a speaker, so it's just playing back what it hears.

From Technabob: The Yellow Drum Machine drives around the room looking for things that might make an interesting sound when tapped on. If he likes what he hears, he starts going to town with a little riff. Once he’s bored, he moves on, looking for something else to make noise with.