It is widely accepted that there is a male and a female of any species. Although this is true for most creatures limilar to us, it is not true for all species.
Supposedly, all life came from a single celled organism. This organism divides in half to reproduce. Although the scientific fields of evolution are developing quickly, I do not know how it happened, and I do not know how a creature that splits apart to reproduce gave birth to a creature that comes together to reproduce.
As I get more servers, I will add the ability to be ever larger and ever smaller of an organism. Too many microscopic AI creatures will bog down the server and lower the quality of the experience. So, for now, very small and very large things will not be fully virtual, but they'll be loosely simulated.
There is no chicken/egg paradox in this game. The first players on the planet will be developers. They, or more likely, I, will make the first skills and make the first simple creatures. They will be things like small insects and plant life. In fact, I expect plant life to be so boring to any player that I have decided to only open the development of plants to the development team. Animals are just so much more interactive than plants.
Some people may ask a simple question of how one species could possibly reproduce with another. If you think about the general species of wildlife, with limited knowledge of variety, you may be quite perplexed at such a question. The answer is almost as simple as the question. Each generation of slightly tweaked creatures is not really a different species. This means that it is compatible with the species before it. Of course, there are certain limitations to this, but those limits can easily be solved by creating multiple offspring and having multiple families.
This game is not limited to the usual reproduction system of chromosomal pairs. There will be plenty of room for imagination when it comes to mixing and matching genes and mutation factors and all of that good stuff. Some players may find that they want there to be three genders instead of two. That sort of thing has to be taken care of, but I will not go into too much detail here because it may not be appropriate for younger readers. Generally, when genes mix together, they either choose the dominant gene, or co-mingle with eachother. If there are two copies of the same gene, there is no problem, but in some cases, when there is a small gene pool, the gene becomes damaged. Without a healthy gene to use, the body is forced to create a creature that may have a very serious genetic defect.