Actually, Rosetree beat me to the answer!! "Making Biscuits" is a kitty sign for contentment. Keep his nails trimmed back and be very thankful that you have such an affectionate kitty!
He is showing his love for you. Cats may even be drool slightly sometimes, mine did. Your cat is back in touch with his instincts as a kitten when he does this, and feeling the same sense of comfort and warmth that he did as when he was with his mother. Be sure to keep your cat's nails clipped short, and you could place a towel to pad your belly.
This kneading behavior mimics what cats do when they are kneading the queen's belly to release more milk while they are nursing. It's not entirely clear why some cats continue to do it on a variety of soft surfaces even as adults. One thought is that it releases neurochemicals that cause relaxation and "good feelings".
It is a good idea to keep your cat's nails trimmed, that will certainly decrease the poking but if you really don't want him to do this, just stand up whenever he starts. Or , grab a pillow, put it on your chest and begin to redirect all the kneading to one specific object that isn't your chest.