Rabbits do not entirely digest all of their food the first time it passes through their bodies. Some other herbivores have more than one stomach, in which the tough fibers of plants are ground up, and some regurgitate and rechew their "cud." A rabbit's pellets are similar to a cow's cud, except that they pass through before they are eaten again; they are essentially undigested pellets of food, and differentiated from feces. The rabbits can tell by smell which pellets are feces and which are edible. Richard Adams, in the Acknowledgements, mentions Lockley's The Private Life of the Rabbit, where he got much of the scientific information about rabbits and their habits.
Anyone who wishes to know more about the migrations of yearlings, about pressing chin glands, chewing pellets, the effects of over-crowding in warrens, the phenomenon of reabsorption of fertilized embryos, the capacity of buck rabbits to fight stoats, or any other features of Lapine life, should refer to that definitive work.
(Adams, Watership Down, Google Books)
This is a natural part of rabbit biology, and is not an example of coprophagia; the rabbits simply eat their food more than once in order to extract the maximum nutrition from it, and because they do not possess the extra stomach of a cow. These pellets are called cecotropes, and are essential to a rabbit's health, as they also contain various bacteria and enzymes that are produced by the cecum, a pouch where undigested matter is compressed and affected by unique bacteria. These bacteria may also help to sustain a rabbit's immune system.