U parku smo vidjeli malog zeca pokraj ograde.

Because u can take different cases depending on meaning.

• u + locative = location, in / at
• u + accusative = movement into

Here the sentence says the rabbit was seen in the park, so it uses the locative:

• park → u parku

Compare:

• U parku smo vidjeli zeca. = We saw a rabbit in the park.
• Idemo u park. = We are going into/to the park.

Croatian often leaves out subject pronouns when they are already clear from the verb form.

Here, smo already tells you the subject is we:

• smo = we are / we have as the auxiliary used in the past tense

So U parku smo vidjeli... already means We saw...

You can add mi if you want emphasis or contrast:

• Mi smo vidjeli malog zeca, a oni lisicu.
  = We saw a small rabbit, and they saw a fox.

Croatian past tense is usually formed with:

• the present tense of biti (to be) as an auxiliary
• plus the l-participle of the main verb

So here:

• smo = auxiliary, we
• vidjeli = past participle of vidjeti (to see)

Together:

• smo vidjeli = we saw

Also, vidjeli agrees with the subject in gender and number.
This form is masculine plural (or a mixed-gender group).

If the group were all female, standard Croatian would use:

• smo vidjele

Because smo is a clitic. Croatian clitics usually go in the second position of the sentence or clause.

So in:

• U parku smo vidjeli malog zeca.

the opening phrase U parku counts as the first unit, and smo comes right after it.

This is very normal Croatian word order.

You can also say:

• Vidjeli smo malog zeca u parku.

That is also correct, but the emphasis shifts a little. Croatian word order is flexible, but clitics like smo still tend to stay near the beginning.

Because malog zeca is the direct object of the verb vidjeli (saw), so it must be in the accusative case.

The dictionary form is:

• mali zec = a small rabbit / hare

But after vidjeti, we need the object form:

• malog zeca

Both words change because the adjective must agree with the noun in:

• gender
• number
• case

So:

• mali → malog
• zec → zeca

Because zec is a masculine animate noun.

In Croatian, masculine nouns are split into:

• animate: people and animals
• inanimate: objects and things

For masculine animate nouns, the accusative singular looks like the genitive singular.

So:

• nominative: zec
• genitive: zeca
• accusative: zeca

That is why the sentence has:

• vidjeli smo zeca

Compare with a masculine inanimate noun, where the accusative stays the same as the nominative:

• nominative: stol
• accusative: stol
• Vidjeli smo stol. = We saw a table.

Because the preposition pokraj takes the genitive case.

The noun is:

• ograda = fence

Its genitive singular is:

• ograde

So:

• pokraj ograde = next to / beside the fence

Other prepositions that often behave similarly are pored, kraj, and some uses of blizu.

Yes. Croatian word order is more flexible than English word order.

The sentence:

• U parku smo vidjeli malog zeca pokraj ograde.

is a natural, neutral version.

But other orders are also possible, for example:

• Malog zeca smo vidjeli u parku.
  This puts more focus on the small rabbit.

• Pokraj ograde smo vidjeli malog zeca u parku.
  This brings by the fence forward.

The main thing to remember is that clitics like smo usually stay in second position.

Because vidjeti and gledati are not the same.

• vidjeti = to see
• gledati = to look at / watch

In this sentence, the idea is that the speakers saw the rabbit, so vidjeti is the right verb.

Also, vidjeti is usually perfective, which suits a completed event:

• We saw it.

If you wanted to say that you were watching the rabbit for some time, you would more likely use gledati:

• Gledali smo malog zeca.
  = We were watching the small rabbit.

In everyday learning materials, zec is often translated as rabbit, but depending on context it can also refer to a hare.

In casual use, learners will often meet it as a simple animal word meaning rabbit/hare. If a precise zoological distinction matters, context usually makes it clear.

For grammar purposes in this sentence, the important thing is that zec is a masculine animate noun, which is why you get zeca.