Living talisman
While the word "talisman" is usually used for inanimate objects and not for living creatures, there are some objects that are borderline cases—objects that technically are living, but for the most part behave and are used like inanimate objects. In some cases, the fact that the object happens to have some sort of consciousness has no effect on its functionality; while the object is living, it is incapable of acting on its own or of communicating without outside help. In other cases, however, the object is immobile, but can communicate telepathically, or has some control over when its powers are activated, or both. In still other cases, the object is capable of independent motion, but its "wielder" still has some control over it: for example, a figurine that comes to life on command.
Of course, those who adhere to the philosophy of panempsychosis would consider all talismans alive, but not necessarily in a particularly meaningful way.
Creation
Living talismans can be created in essentially three ways. The first way is for a living creature to be turned into an object. This frequently results in a living talisman of the first type, one which has no ability to affect its environment without external aid and which is undetectable as living without special magical means; the talisman may once have been a living creature, but for all practical purposes it may as well not have been. Living talismans of this type are often tormented by their helplessness and paralysis, and perhaps in other ways as well—a living weapon, of instance, might feel pain each time it hits something. In other cases, however, the living talisman may actually enjoy its form, perhaps finding some contentment in the thought that the fact that it couldn't affect anything if it wanted to frees it from responsibilities, or perhaps simply finding some odd pleasure in immotility.
Living creatures turned into talismans, however, are not necessarily so impotent. They can also become talismans with the ability to communicate with their owners (or with anyone nearby), or with the ability to spark some or all of their powers at will—or at least to withhold the activation of their powers if they choose. Or, of course, like the figurine mentioned above, they can have full range of motion and activity, at least for some periods of time, but still have to obey their owner's commands.
The second way a living talisman may be created is by imbuing some formerly nonliving object with a soul and some measure of sentience. Talismans formed in this way almost always possess some control over their powers or capacity for communication or independent action, since otherwise their being granted life would be pointless. The soul imparted to the talisman may come from another plane, or even some sort of ghost or spirit creature from the enchanter's own plane; in either case it may resent its imprisonment in the talisman, or it may enjoy the powers thus gained—or it might have all memories of its former existence wiped when it is put into the talisman, though this mnemonic erasure may or may not be perfect or permanent. Alternately, it may be newly created, the talisman granted a life that has never existed before.
(There are intermediate methods that could be thought of as combinations of these two methods; a copy of a person's soul may, for instance, be placed within a talisman. But these methods are relatively rare and, in any case, introduce few new complications.)
The third and rarest way for living talismans to be formed is by a method analogous to the reproduction of living creatures, resulting in living talismans that had no previous existence either as creatures or as objects, but were living talismans from their formation. Living talismans that form in this way are uncommon, but can take a wide variety of forms—though in this case the distinction between talisman and creature is even more vague than in the others.
Intelligence
Regardless of how the living talisman is formed, the fact that it is alive does not necessarily mean it is intelligent. Many living talismans are as intelligent as humans (especially those that were once humans), but others may be no more intelligent than horses or dogs, or even insects. If a living talisman started as some other form of creature, it usually retains the same intelligence, though not necessarily—it is possible for a creature's intelligence to be diminished when it is transformed, or even augmented, but this is uncommon. Likewise, if a living talisman is created by implanting an object with a preexisting soul, then the nature of that soul may determine the talisman's intelligence. Otherwise, the talisman's intelligence is likely to depend on the purpose it is intended for and the powers it wields. A living sword meant to share arcane knowledge with its wielder is likely to be much more important than a living sword that only alerts its wielder to the presence of danger.
Communication
Many living talismans are able to communicate with their users (and perhaps with others as well). The means of such communication, however, vary. Some living talismans are able to speak normally; others can produce sound, but not necessarily speech, and can work out ways of communicating with whatever sonancy of which they are capable. Other living talismans devise methods of communication through vibration, or changes of color, or any other signals they can manage. A few have the ability to communicate more directly, through telepathy—sometimes only with the person holding them, but in other cases with anyone nearby, or perhaps even over wide distances.
It is, of course, possible for a living talisman to be able to communicate in more than one way, to, for example, have the power of speech but prefer to rely on telepathy when there could be danger of enemies overhearing.
Living talismans versus magical creatures
The distinction between a living talisman and a magical creature is not necessarily straightforward, and there are some cases that are difficult to classify. In general, however, there are a couple of criteria that tend to be used. One important criterion is whether or not the object in question can spark its own powers. If it can use its powers at will (in celemological terms, if its enchantment is auturgical), then it is more likely to be considered a magical creature. If its powers can only be used by others (its enchantments are xenurgical), it is more likely to be considered a living talisman. In those cases when all the enchantments are aeiurgical or hysplegic, the object is more likely to be considered a living creature if the enchantments affect only itself, and a talisman if they affect its surroundings, or especially if they affect a person holding it.
In practice, though, whether an object is considered a magical creature or a living talisman often comes down to its form, appearance, and substance. Something that can fly around where it wants and use any of its magical powers at will, but is made of metal and looks like a sword, is likely to be considered a living talisman; something that looks and feels like a fern, and seems to have a fern plant's anatomy, but has magical powers that can only be tapped by a person holding it, is likely to be considered a magical creature. Only in borderline cases—an object that looks like a sword, but is actually a soft-bodied creature with a mollusklike anatomy and a hard shell that appears to be metal but isn't; or an object shaped like a fern but made of metal—are other criteria likely to be really taken into consideration. Ultimately, the distinction is semantic anyway, and in fact many celemologists consider the matter moot; all magical creatures are actually also living talismans, and vice versa. Whether an object is considered a living talisman or a magical creature is only a matter of definition and doesn't really matter—unless, as is sometimes the case, local laws make a distinction between the two.