When a wild Pokemon is caught, it also adds two things to the inventory: Stardust and Candy. Candy is specific to the earliest evolution stage of a Pokemon species. For example, catching a Pidgey gives Pidgey Candy, and catching a Pidgeotto also gives Pidgey Candy. A Pokemon can also be “transferred” (i.e. sold forever) to Professor Willow for one candy.
Pokemon require an amount of their specific Candy type to evolve. The amount of Candy needed varies, but basically if you want to evolve a Pokemon, catch more of it to build up that Candy collection! Candy can also be used to strengthen a Pokemon by raising its Combat Power. This stat dictates how a Pokemon performs in battle. Evolution also raises the CP levels and CP cap of a Pokemon.
Originally Posted by: gamespot.com