I just want to ask, how do you get a chao to live three lives? Thanks.
When a chao reaches age five, it goes into a cocoon. Depending on how it's been treated during its life, it will either be reborn as a baby (keeping its name, sometimes a few animal parts, and ten percent of its previous stats) or die completely and never return. The first occurs if you've treated the chao well; it will go into a pink cocoon and come back as an egg. The latter happens if you've mistreaded your chao (ie, beating or throwing it often); it will go into a grey cocoon and disappear. If you continue to treat your chao well, it can reincarnate as many times as you want.

~ Crazy C Lea