Why does our cat drag his toy around while meowing?

He is a three year old DSH tabby, and he has been doing this for about a couple of months. He drags one particular toy (a long tassle on the end of a wand) around the house at any given time of the day, and he seems to prefer doing it in such a way that he is pushing the wand in front of him. He also drags his baby blanket around with him in such a way that he looks like he is about to hump it (as he straddles it while walking), and he also kneads it with his front paws. Why is he doing this? Has he completely lost his mind?