Two possibilities: The second, much less likely possibility is that the baby was born with an abdominal hernia where there is an opening where the belly button is supposed to be that is larger than normal and the intestines are coming out through the opening. If the thing doesn't detach than this may be what it is. Some people have been able to save the baby by pushing the intestines back in and (believe it or not) supergluing the skin closed.
Aliza