The animals look like animals, but that's about it. They have the general life of animals (outside, what they eat, etc.), but they are just ideas, or representatives of people. For instance, they can talk, train/capture other animals, lie, manipulate history for their own advantage and generally have most of the qualities associated with the tyrants they represent. So the Old Major presents the ideas of Marx and sets the stage for the "Revolution." At no point does he seem to be an animal, yet his not being a person helps us focus on the ideas rather than the person about whom we may have strong opinions. It's a great technique. In your initial read it's fun trying to figure out who the animals "represent," and in subsequent readings it's fun to find the subtle little ways they really "are" these people.
Interesting question, and here are my thoughts regarding it.
How do the animals act like animals: You have the obvious answers (they live outside) and then there is the not so obvious answer. The animals act in the manner animals are supposed to act, i.e. the pigs are greedy, the horse steadfast and loyal, the guard dogs protective and mean, etc.
Their ideas, and I'm not sure of the nature of your assignment, so you may already know this, but their ideals parallel communism, which was a purely human invention. The pigs are all based on Soviet leaders and act accordingly. Napoleon (Stalin), Snowfall (Trotsky), Squealer (Molotov), and Old Major is a cross between Marx and Lenin (note how his skull is put on display by the others). The pigs overthrow and regime is a parody of the Russian Revolution, with the animals acting in for the various groups.