Larvae can mutate into any other Zerg unit. They are the Zerg's equivelant of the Protoss and Terran unit production buildings. Larvae are produced automatically over time by every Hatchery, and are produced more quickly as the Hatchery evolves. A maximum of 3 Larvae can be supported by each Hatchery, but all 3 can mutate simultaneously. This gives a Zerg player the ability to create enormous armies in a matter of seconds in order to overwhelm his or her opponents.
Each larva contains within it the genetic makeup of every other Zerg breed. A young hive will only have the genetic code for the most basic of Zerg breeds, such as the Drone, but as it grows and develops new structures, the larvae can expand their library of genetic strains. With a command from the Overmind, the larvae will enter a pupal state and begin the metamorphosis into whichever breed is required by the hive.
StarCraft 2Larva is still used as the Zerg's production mechanic in StarCraft 2. It has not changed much, other than having gained some new units it can mutate into, and losing some old ones. As part of increasing the game's macro mechanics, the Queen is now able to spawn 4 additional Larvae at any Hatchery, which allows for even faster massing of units.