The Prehistoric Egg hatches into an Armadillo Pet after walking a certain amount of blocks on public islands. Moving in other ways does also count towards this (for example by using a Grappling Hook, by flying and teleporting, though teleporting only counts as moving one block), except when riding a Horse Pet or Armadillo Pet. The Egg's rarity increases based on what Armadillo Pet can be hatched from it.
When failing to hatch at the above distances, the Prehistoric Egg will cross out that line of text and update its rarity to its new potential hatch. There is a bug when holding it and being on or next to a pressure plate, it will keep saying "You cannot use this right now. ". This is done easily in the tavern.
Trivia[]
Recombobulating this item will not increase its rarity, but it will add the usual obfuscated text indicating it has been recombobulated.