During the egg stage, the caterpillar is developing inside the egg. Once it hatches, it enters the larval stage and begins to eat and grow. As it grows, it will shed its skin several times. When the caterpillar is ready to pupate, it will spin a cocoon around itself and enter the pupal stage. Inside the cocoon, the caterpillar's body will undergo a dramatic transformation, and it will emerge as an adult butterfly or moth.
The process of metamorphosis is essential for caterpillars because it allows them to change from a worm-like creature into a winged adult. This transformation is necessary for them to be able to reproduce and disperse.