At least, that's how Majesco puts it. I think the use of the term "virtual pet" does a disservice to the game. People who are into virtual pet games would likely find the interactions with Chomp too limited and the platformer on the top screen too distracting; and while those who like action-platformers would probably really like the upgrading system Chomp provides, they might never know it due to their instinctual evasion of pet sims.
Ellie, a human girl trying to protect a land of monsters from the delinquent kids who have overrun it, has a melee attack and an upgradeable projectile weapon to protect her against enslaved monsters. When she is overwhelmed, or whenever you feel like it, she can summon her monster friend Chomp from the bottom screen, who has several special attacks and a shield move that can be used until he runs low on health, at which point you return him to his home to recuperate.
When Chomp is just hanging out in his lair, he eats items dropped by enemies on the top screen, which raise his stats and, eventually, lead him through one of thirty transformations, into a bigger, stronger, smarter monster with new abilities and increased health. He also "learns" how to use support items dropped into his home, including catapults, that he'll then use to support Ellie by attacking from the bottom screen. You can direct Chomp to food and items at your own pace, but he'll get to it automatically, too, if left to his own devices.
As a virtual pet, Chomp seems lacking. Granted, I didn't get much time to get to know the guy, but his AI "personality" seems pretty much limited to investigating every item sent down to him. Luckily, I don't care about virtual pets at all, and this behavior is perfectly suited for the Metroidvania-like action game that I do like playing.