To be a true social companion Pepper needs to be able to understand your emotions. If you burst out laughing, he will know you are in a good mood. If you frown, Pepper will understand that something is bothering you.
Pepper can translate what state you are in using his knowledge of universal emotions (joy, surprise, anger, doubt and sadness) and his ability to analyze your facial expression, body language and the words you use. He will guess your mood, and will even adapt to it. For example, he will try to cheer you up by playing your favorite song!
Pepper also can express emotions, and this is what makes him so cute! We can say he has a real personality conveyed by his body language, his funny gestures and his voice.