What is she holding? An instrument of some kind, or maybe a music box? I looks hand-cranked, whatever it is, but I just have never seen something like it before in RL.

It's a Hurdy Gurdy/Wheel Fiddle. Can't say I'd ever come across them, either. The artist linked to this video in the pixiv description, though. It's a bit of Russian music played on one: http://www.youtube.com/watch?v=_DX08nQows0 Sort of interesting.