The Dragon is a memento found in Silent Hill: Shattered Memories. Harry Mason can locate it on a bench in the Resort Area, just outside of Lakeside Amusement Park. The memento is a red stuffed dragon obtained from the "Myths & Legends" exhibit inside the park.
"The Dragon" is likely a gift Harry bought for his daughter Cheryl before his death. It may represent how Harry was a hero in Cheryl's mind, her "knight in shining armor".