Monster Evolution is a process in Starbound wherein a monster evolves from its baby stage to its adult stage. During this change, the monster grows, becoming physically larger. Additionally, the monster will often become more powerful.
Pretty sure they already have this in the game, minus them evolving to sentient species. Monsters do change over time. Had it on one nightly build where I was fighting a yellowish monster that walked on all fours and had 4 eyeballs, and it would shoot eyeballs at me in an arc. Few days later, same monster's eyes were gone and it just had a mouth. This time, it fired teeth in a direct line, making it more challenging to fight and dodge.
It would be neat to have monsters with life cycles, but I don't like the idea of them eventually turning into NPCs. Unless, of course, it's fully related. For example, a frog looking creature growing into that Frog person Npc thing that you accasionally find beneath the surface.
I had a funny idea where a planet would randomly generate a series of monsters, and the different monster types would keep a "score", which increases when they damage a player and massively increase when they kill a player. After a while, the best monsters, along with a few new random monsters, would be mixed together using a genetic algorithm. What does this mean? It means that, like how Box Car 2D designs vehicles whose sole purpose is to get as far along a track as possible, the game designs monsters whose sole purpose is to kill you (and, if you are the only person to visit that planet, only you.)
Wow this is a really neat idea. It would be kinda hard to implement and would require many steps to evolve around it but seems like a nice thing which would bring more variety and exploration value. I will put a link in my thread where i collect ideas about things would be nice to have and would help to aid the developers in their attempt to solve the problems they stated out at the unstable summary. Here is the link to the thread : http://community.playstarbound.com/index.php?threads/re-to-the-developers-return.88543/#post-2378190