When your Chao curls into a cocoon for the first time, it comes out as either Hero, Dark, or Neutral. This affects how your Chao evolves for the second time.



When your Chao evolves into one of the 3 types, it changes according to what colour animals/drives you have given it the most. This was its FIRST evolution.

After this evolution, if you give it more animals/drives. It will change again depending on what colour you have given it the most. This will be its SECOND evolution.

However, for the second evolution, your Chao will not go into a cocoon. It is just a change that will take place gradually as you give it more of a certain colour of animal/drive, and as the Chao grows. It is more noticable if you wait for a while before you start attempting a second evolution. A guideline to see when the change will happen is usually after its first (natural) mating season.
It will achieve the second evolution quite late on in its life (about 3-4 years for GC). You can get a huge variety of different Chao!

It will take as many drives/animals as a first evolution would, and it is not dependant on stats! For example it could have a very high stat in running, but when it comes to its second evolution, and you give it yellow drives/animals, it will go into that path.
Also, after the second evolution is done, you can make it change to a different evolution by giving it drives of that colour. For Example, If I had an Advanced Sonic Chao, I could give it a lot of purple class animals/drives and It would start to change from an Advanced Sonic Chao to an Elf Chao.

So now, just so you understand, (i've been getting emails about this) the FIRST colour is the FIRST evolution. The Second colour is the SECOND evolution. So Dark/Purple/Red would mean when it is a baby, you give it purple drives/animals, and turn it Dark. Then when it cocoons it will evolve as a Basic Reala Chao. Now step one is done, we aim to create a second evoluton. Give it red animals/drives around 3-4 years of age and it will gradually change into what you want, which is a Satan Chao