The way breeding works is rather simple. Each Pal has a hidden 'breeding power' number between 10 and 1500. The lower the number the more rare or powerful the Pal is. All Pal Power levels can be found on the "Visual Data" tab of the sheet. The breeding power of both parents is averaged to determine the baby/egg's power: (Parent 1 Power + Parent 2 Power) / 2 = Baby Power. The game will then pick the Pal with the closest power to that average. As an example, if the baby Power ends up being 1015, and the closest values are 1010 (Felbat) and 1020 (Robinquill), the baby will be Robinquill. The 'tie breaker' (since 1015 is equal distance between 1010 and 1020) just comes down to the which Pal comes first in the game file's index. In this case Robinquill comes first in the game files so it gets picked over Felbat.

The way this works means you can never breed a Pal stronger/rarer than your strongest/rarest parent. For example, if your starting parents have a power of 570 (Anubis) and 1460 (Cattiva) the result will be the following: (570 + 1460) / 2 = 1015 (Robinquill). If you then bred that baby at 1015 with your starting 570 Anubis: (570 + 1015) / 2 = 792.5 (which is closest to Arsox at 795).

If you continue this multiple times:

(570 + 795) / 2 = 682.5 (Univolt at 680)
(570 + 680) / 2 = 625 (Bushi at 625)
(570 + 625) / 2 = 597.5 (Incineram at 605)

As you can see you can get closer and closer to your 570 Anubis but you can never breed something stronger/rarer. But this also shows you can take one strong/rare Pal and breed it with its offspring and quickly start making Pals near that strength.

• Palworld Breeding Calculator[palworld.gg] by Palworld gg[palworld.gg]
  
• Pal Breeding Calculator[palworld.kimpton.io] made by uk-youngprofessional on Reddit.
  
• Palworld Breeding Calculator[paldex.io] by Paldex io[paldex.io]