A Punnett square is used to predict the chances of an offspring to have its parents traits. These squares are most commonly divided into four parts, with each part equalling a 25% chance of the offspring receiving that set of genes. More complicated squares may have more than four parts, though the same basic method applies.
The letters surrounding and within each square represent alleles. They are one part of a gene pair occupying a specific part of a chromosome. All dominate alleles have capital letters, while the recessive ones are lowercase. Dominate alleles will always overpower recessive ones in the expression of the gene.
If the alleles for a parent do not match, they are known as heterozygous. In the image above the Gg is heterozygous. This can happen if there is a dominate and a recessive gene in the parent. If the alleles are the same for that expressed gene, it is known as homozygous.