Pokemon Day Care
Breeding takes place at the Pokemon Day Care Center. When you visit this building, the woman inside accepts two of your Pokemon. While your Pokemon stay at the center they mature, gaining experience and moving up levels as if they were still with you engaging in battles. Many players use the Day Care as a hands-off means of training Pokemon more quickly. If the two Pokemon you leave at the center are opposite genders and compatible types, they will produce an egg that hatches into a Level 1 Pokemon. The hatched Pokemon inherits moves from its father and its appearance from its mother, if the parents are different species.
Pokemon Compatibility
Pokemon belong to one of 17 types, such as Fire, Water and Grass. Some Pokemon have dual types like Bug/Poison and Ice/Dark. Generally speaking, Pokemon that share a type have a good chance of producing an egg. When you leave two Pokemon at the Day Care, talk to the man standing outside the building. He'll tell you how well your Pokemon get along. If they prefer to play with others, there won't be an egg, but if he says anything else, there's a chance of an egg appearing. The man will contact you when an egg appears, or give you a application that allows you to check the status of your Day Care Pokemon so you know when to return to pick up the egg.
Egg Groups and Ditto
In addition to having a type, each Pokemon belongs to one of several egg groups, such as Monster, Plant or Dragon. Several belong to two groups, which increases their breeding options. Pokemon within a specific egg group can breed successfully with one another. Those in the "No Eggs" group, which includes the genderless, no-evolution legendary Pokemon, cannot breed. Some of the species in this group, however, such as Budew, can reproduce after they evolve because their evolved forms belong to other egg groups. The Pokemon Ditto is an egg group unto itself. This genderless, shape-shifting Pokemon can breed with any Pokemon, including genderless species and members of the "No Eggs" group other than legendary Pokemon, to produce a Level 1 version of its breeding partner.
Baby Pokemon and Incense
Some Pokemon that you see in the game have pre-evolution forms, also known as baby Pokemon, that do not appear in the wild. The only way to get these Pokemon in their baby form is to breed their evolved forms and hatch the baby from an egg. Certain species, such as Wobbuffet, require one of the parents to hold special incense to produce an egg containing the baby form of the Pokemon. Otherwise, the breeding pair will produce an egg that contains a Pokemon with the same evolved form as its parents.