Nogard said:
IV's stand for "Initial Values" Basically, whenever a pokemon is hatched from an egg or captured in the wild, it has initial values for all of its attacks, defense, and speed. This number is completely random and because of it, if you have two pokemon that you hatch at the same time and level both of them up to 100 using the EXACT same tactics (battling same pokemon; same moves, etc...) then the one that had the better IV's when it was hatched will win a battle (critical hits not counted) every time against the other. However, the artist of this didn't take into account that the offspring's IV's depend 0% on its parents' IV's so the whole joke is kind of lost.

In short, Lucario on the left has smaller cock but better IV's and the other Lucario with the bigger cock is like "wtf?!?"

Actually, that's not quite true. Ivs are passed down during breeding. I'm not sure about the exact statistics and percentages or whatever, but you can find a guide on IV breeding on Serebii or other pokemon websites.

Something like...2 values from one parent are randomly chosen, and another 2 from the other parent and then given to the offspring. I don't know, I haven't played in a while.