From Nookipedia, the Animal Crossing wiki
Dr. Shrunk (ししょー, Shishō) is an axolotl who first appears in Animal Crossing: Wild World, and has appeared in every game since, including Dōbutsu no Mori (film). He is a psychologist that can help players get in touch with their emotional side, allowing players to express specific emotions. His name could refer to the word "shrink", which is a psychologist.
In Wild World, Dr. Shrunk will visit town occasionally on a day from Monday through Friday, between 6:00 AM and midnight. Talking to Dr. Shrunk leads to him teaching the player to display a randomly chosen emotions. In his first visit, the player can learn only one random emotion, but from the second and forward the player can choose one from four random emotions depending on the answer to a series of questions.
In City Folk, Dr. Shrunk hosts comedy shows at the Marquee in the City, which can be viewed after paying the clerk 800 Bells. A possible villager might appear at the show, usually complaining about it. Shrunk will teach the player an emotion afterward. The emotion taught can be chosen while paying the clerk, when the clerk asks the player which show he or she wishes to see.
In New Leaf, Dr. Shrunk owns Club LOL, which is built after the player obtains signatures from six villagers, after Dr. Shrunk asks them to do so. He states he is retired as a comedian, but if the player brings him a piece of fruit, he will get on stage and perform a joke, teaching the player an emotion. When teaching the player an emotion taught by Frillard in the last game, Shrunk will act nervous and say that he is worried about not delivering the joke as well as "He" (Frillard) did.
Players can learn 40 emotions, and unlike in previous games, players can use all of them without having to stick with one.
Dr. Shrunk has a very minor role in the movie. He can be seen with Lyle in the audience at the fireworks show.
 Other appearances
In his spare time, Dr. Shrunk is a comedian, which leads to him telling jokes often. He is usually cheery, but because of his role in the game, his emotions fluctuate whilst he tells stories. He is a forgiving character, even cheerily explaining who he is if the player forgets. The character can be seen as ambitious, as in City Folk he realizes his dream of becoming a professional comedian and works at the Marquee.
It is hinted at several times that he has a wife, and it appears she treats him fairly badly due to his bad jokes. In Animal Crossing: New Leaf, Shrunk states he also has a son and a young daughter.
Dr. Shrunk's role in all games to date is to teach the player various emotions. Once learned, the emotions can be accessed at anytime, which is done so in the chat interface. Emotions have no effect on non-player characters, although they are useful and amusing when playing online with other players. In earlier games the player can only have up to four emotions at a time. If another one is desired, the player will have to select the one they want to replace with the new one and Shrunk will "shrink" the old emotion. In New Leaf, however, the player can choose from any emotion they learn.
 Names in other languages