No one really knows how purring is effected. There are theories that its in the vocal chords as they reverberate and some theorists think it exists elsewhere in the body...
What we do know is that cats/kittens do it when they are either contented, trying to locate their mother's milk (some say this is so she knows where they are if I recall) or in pain and discomfort....
My boy JC (actually he's my daughter's cat, but stays with me most of the time) loves to purr. We tell him he's the Purr Master, with the MasterPurrBox. With him, it seems to indicate that he's very happy with life in general. Almost any situation will elicit purring, whether he's relaxing & just giving me those loving eyes, or watching birds through the window, or playing etc. Your Lil Rascal is adorable; from those bright intelligent eyes & alert expression, I'd say he's purring cuz he has Joie d'vivre!
Cats will purr when they are content, frightened, and even in pain. A purr is the first sound a kitten feels and this is how he navigates to mom, by the vibration of the purr.