Offspring can inherit traits and skills from their parents, giving the player more control over their new starting character than the Character Creation system provides. Some players mate through several generations in order to craft their ideal dwarf; some recessive traits, such as Gorgon-Taming, can only be passed on in this way. Mating with specific She-Dwarfs can give the offspring certain special skills.
It's also possible for the offspring to be given one weapon, one item, and one piece of armor; this is a good way to keep ahold of valuable gear. (Some gear, such as the Sasquatch Hide Armor, cannot be passed on because it disappears after being unequipped.)