Pokémon GO is an AR game, meaning that everything takes place in the real world. You'll explore your surroundings to catch different types of Pokemon that appears in their native environments. Water-type Pokémon can appear in lakes for example.
Shops (called PokéStops) will let you buy Poké Balls and you'll find them inside art installations, historical markers and monuments.
As players progress through Pokémon GO, their Trainer level will increase, enabling them to capture more-powerful Pokémon and gain access to more items. Pokémon will still be able to evolve and certain Pokémon will come in eggs, bought in shops. After a certain number of real world steps, they'll hatch.
You'll compete with your friends by completing challenges and getting together in Gyms. Those Gyms will also be real world locations that you'll have to defend with your friends against other players.
A test is set to begin in Japan soon with a worldwide launch later this year.