"Two Tone Chao" are Chao with highlights (eg. normal Chao: the default eggs). Coloured Chao and Shiny Chao from the Black market are monotone, they are just one colour with no highlights. When a monotone Chao breeds with a two tone Chao, the baby Chao may come out as one of the following:

Lets say we bought a Green Chao from the black market, and then it mated with a normal Chao, the possibilities of the baby Chao would be -

With Shiny Chao, there are even more results! So... lets say we bought a Shiny Orange Chao from the black market, and then it mated with a normal Chao, the possibilities of the baby Chao would be -

So a "two tone" Chao is basically a Chao that has highlights dependant on its colour. With these you can get a whole load more of different Chao! Much more variety than the Dreamcast version.

Wow, so since there are 28 monotone Chao from the Black Market, that gives us a total of 29 different two tone Chao! (including the normal Chao you get at the start, thats a two tone too!) I have no pictures yet but heres a dramatic reinactment.