If I'm right, there are 9 elemental stones in the game. Lightning, Fire, Ice, Moon, Sun, Plasma, Death, Zombie, and Life. You can only choose one.
Lightning- Your dragon will gain the ability to call down a lightning nova, dealing AoE damage.
Fire- Your dragon will shoot fireballs. Somewhat ineffective, since you can't control the direction it faces easily.
Ice- Your dragon shoots balls of ice. Same issue as the Fireballs.
Moon- Your dragon calls down hail. Deals more damage than lightning, and slows.
Sun- Turns your dragon into a flamethrower. Great damage at close range.
Plasma- Your dragon gets a long range attack that will hit very hard, but is very hard to aim.
Death-Your dragons attacks will deal 1/5 of enemy health.
Zombie- Your dragons attacks will turn enemies into zombies, where they decay and die in seconds.
Life- Your dragon will shoot a power ball. It will also heal your hero.
Once you apply a stone to your dragon egg, it will take ~15 fights to hatch. Once it hatches, you have to get 1200 experience for your dragon before it will learn to attack. At level 7, their attacks get much stronger and have more of an effect. (There may be more levels, I haven't reached them yet.)
Side note:
If you want the game to go smoothly for you, start out as Umbra. Charms/gear/stones found can be used on other characters by putting it in your stash.
Atal gets screwed up pretty easily without high defense/health.
Azarac is weak early game, but once you get lightning nova things get easier. Stack exp+ gear to level her up as quickly as possible. Defense/Life charms will let her tank her way until she gets lightning nova.
If this helps you, copy/paste it and keep it recent for players to see.
Original Poster - Krefe