That's just a "pin" (early bloom) of the mushroom coming out of the surface of your mulch. Because of it's color, I would be a little concerned that it may be a Jack 'O Lantern mushroom which is the only orange colored poisonous mushroom in the states.

You'll know a Jack '0 Lantern mushroom because if you go out in the dead of night, you'll see that their spores grow an eerie green. (Seriously, I don't make this stuff up)

Either way, you're mulch is rotting and it's helping the process along for you.

Here is a link that might be useful: Omphalotus illudens

Had them last year too.

This a posting I posted on another forum. Do you think a mushroom can be 12 inches wide and no inches tall? Thanks for any help.

Hi Tennessee Gardeners, I am hoping you can help me with some problems we are having in our Antioch (Nashville) garden.

1. We had some black mulch put down by our lawn guy last summer. This spring as we were digging in the mulch, we have noticed a white "dust" or fungus inside the mulch. We have noticed that where we disturbed the mulch an orange thing grows for a few days. This orange thing is about 12 inches wide and looks like foam insulation. What is the white "dust"? Good, bad or indifferent? What is the orange thing? Is it connected to the white "dust?"
2. Has any one tried to use wet news papers to keep weeds at bay? I read in a "pass this to ten other people" email about how you can use wet newspapers under soil or mulch.

Thanks for your help, Beth in Antioch

The orange thing that Beth has is probably a slime mold. Doesn't do much, just ingests a small amount of organic material.

We've used newspapers under mulch for five or six year. If it's windy we wet them to keep them in place when shoveling mulch, otherwise they can go down dry. In a year with normal rainfall, six to eight sheets of newspaper will decompose under our mulch between spring and the next spring.