It's a small stringed instrument in the lute family, used in music from the Andes. There are different configurations, but it often has five double courses, so ten strings. Traditionally, the back was made of an armadillo shell, although most modern ones (ie, ones not for the tourist trade, so I have read) have backs made of wood. The traditional gig bag, if you can call it that, is made of brightly-colored woven fabric; your blanket reminded me of the bag.