The animal life/kingdom according to ancient Hindu scriptures, and many other ancient text, is a karmic reaction to the way we as humans behave. Our souls can pass through many species of life, but only as human beings we develop karma.
With free will comes power and responsibility. Humans who abuse or misuse their free will have to lose it for some time. Some souls will have to incarnate as an animal. And the degree of suffering or enjoyment they have in animal life is directly related to what they did in their past human Incarnation.
Animals cannot create new karma because they are completely controlled by their nature. Similar to criminals who are incarcerated, souls incarnate as animals to serve out their karmic sentences until they again are eligible for a human form of life, in which they will be given another chance to act responsibly and progress.
Although there are some souls who will never incarnate as a human, and some souls will never incarnate as an animal.