Hypatia (the ship) was alone a lot as a child and had a teddy bear that she talked to. When she got made into a spaceship, she had him installed in a wall, as a symbol of her lost childhood and whatnot. At the big revelation scene where she and Alex (the guy) acknowledge their love for each other, she has Alex take the bear out of the wall and hug him, because they cannot touch each other, and it is very angsty. That night, he has an erotic dream in which she turns into the bear. At the end (I guess this is a spoiler, but it's not really) she gets an android body, and sits in revealing clothes on his bed holding the bear. Throughout both incidents (and throughout most of the book) he is very upset with himself about what a pervert he is. (He gets over it and they have sex in the latter one, and presumably said android sex will solve all of his emotional problems.)