From Bulbapedia, the community-driven Pokémon encyclopedia.
Evolution in the Pokémon Trading Card Game is very similar in some aspects to its counterpart in the main series. However, it differs mostly in the fact that there are no different methods needed to evolve a Pokémon, but instead, all Pokémon evolve simply by placing the next stage on top of a Pokémon in play that it evolves into.
Pokémon cannot be evolved on the first turn of the game or on the first turn they come into play. They also cannot be evolved if on the same turn they were previously evolved or devolved.
Stages of evolution
There are four different stages of evolution in the TCG, Baby Pokémon, Basic Pokémon, Stage 1 Pokémon, and Stage 2 Pokémon. Of these, only Baby and Basic Pokémon may be placed onto the Bench during the setup phase and during play; Stage 1 and Stage 2 Pokémon are considered to be evolution cards and therefore unable to be played except on top of their corresponding pre-evolved forms. The stage of evolution is indicated in a conspicuous place on each and every Pokémon card, though the placement differs among the four generations of cards.
Within the deck and discard pile, only Stage 1 and Stage 2 cards are considered to be "evolution cards" for the purpose of a Trainer card or Pokémon Power which allows them to be searched for. In play, a Basic Pokémon card can be considered an evolution card if it is evolved from its Baby stage.
A Baby Pokémon is much the same in the TCG as it is in the main series of games. In fact, as with baby Pokémon released beyond Generation II, it is not even necessary for a Pokémon to even go through this stage of their evolutionary line, as the Pokémon can just start from their basic form. Baby Pokémon are among the weakest in the TCG, most often having 30 HP, as well as one of two special Abilities; one prevents all damage done to the Baby Pokémon while it is Asleep (Baby Pokémon with this Ability also usually have an attack that changes their status to Asleep), and the other forces a Pokémon attempting to attack the Baby Pokémon to flip a coin, the attack doing nothing if that coin ends up tails.
A Basic Pokémon is the most basic of Pokémon cards, as can be deduced from its name. Commonly basic Pokémon will have low HP, a common rarity, and low damage and Energy costs. These cards can be placed directly into play without another Pokémon card needing to be in play first. Pokémon that evolve from a Pokémon released in a later generation, such as Electabuzz or Pikachu, always are basic Pokémon, despite being the second Pokémon in their own evolutionary lines. Baby Pokémon, Shining Pokémon and Pokémon are always Basic, the latter two cannot evolve.
Stage 1 Pokémon
A Stage 1 Pokémon are the first kind of evolution card, being able to be evolved from a Basic Pokémon. Stage 1 cards are most commonly uncommon in rarity. Stage 1 Pokémon are also able to be Dark Pokémon and Light Pokémon.
Stage 2 Pokémon
A Stage 2 Pokémon is the highest of evolution cards, commonly rare or holographic in rarity, and can only, in normal conditions, be evolved from a Stage 1 Pokémon. Stage 2 Pokémon are also able to be Dark Pokémon and Light Pokémon.
Ability to evolve
A Pokémon card that is in the player's hand must say specifically that it evolves from a Pokémon card that is in play on the player's side. For example, Dark Blastoise states on the card "Evolves from Dark Wartortle". This means that any card named Dark Wartortle may be evolved into Dark Blastoise. However, a card simply named Wartortle cannot. Likewise, Pokémon such as Rhyhorn cannot be evolved into a Pokémon that says on it "Evolves from Team Magma's Rhyhorn".
However, Pokémon cards from different sets may evolve into one another. For example, Dark Crobat can evolve from either Dark Golbat of the Team Rocket set or Dark Golbat of the EX Team Rocket Returns set. So long as the card names match precisely both TO (here Dark Crobat) and FROM (here Dark Golbat), the evolution is legal. This rule, of course, can be circumvented by certain means, such as Pokémon Powers and Trainer cards, however, this is not common.