Geodes are technically sedimentary rocks, since they are the result of the action of water. Geodes are formed when cavities in a host rock (which may be sedimentary or igneous) become lined with a durable mineral, often a variety of quartz.

The term geode usually refers to rounded nodules with hollow centers. Some sources define a geode as a rounded nodule which is harder than the host rock (and thus can weather out of it). Cavities resulting from cracks (perhaps due to shrinkage or geologic faults) are generally called vugs. Note that "vug" is a generic term for a cavity in a rock, and thus applies to geodes as well. Another distinction is that a vug doesn't necessarily weather out of the host rock (which may be quite durable, possibly more so than the crystals lining the vug). Once the geode becomes completely filled, it is more properly termed a nodule (although the term geode is still commonly used).

The geode cavity itself can have multiple origins. For example, it may have resulted from the decay of buried organic matter, or from the consolidation of trapped gasses within a volcanic ash fall. It may also result from the dissolution of a mineral such as calcite. Groundwater containing dissolved minerals fills the void, and minerals crystallize along the edges of the cavity. Rapid crystallization of quartz results in a lining of agate. Later, slower, crystallization will produce distinct crystals of minerals such as quartz, amethyst, calcite, gypsum, and barite.

The conditions of formation create distinctive shapes. Some geodes are nearly perfect spheres. Others are teardrops, still others rounded tops with flattened bottoms. Some are lens shaped (convex tops and bottoms, often shallow), and many are rather irregular. Some large geodes have multiple interconnected pockets.

Geodes provide a sheltered environment for the growth of beautiful crystals, and sometimes rare minerals found nowhere else. Many of the world's best crystal specimens have been found inside of geodes. Some extremely rare minerals have been identified because the pristine environment of a geode allows a unique crystal to form, one that looks out of place and clearly a different mineral from the bulk of those around it.

Geodes are common in certain parts of the world, including the Midwest United States (especially Indiana, Kentucky, Illinois, Missouri, and Iowa), Utah, Brazil, India, and Mexico. Certain areas are known for distinctive geodes, such as the celestite geodes found in Madagascar, or the zeolite geodes (and okenite geodes) of the Deccan Traps (ancient basalt flows) in India especially around Poona.

Geodes are popular at rock shows, as unopened geodes may be purchased and then cracked, broken, or cut open to reveal the interior to the buyer - who is usually the first human to glimpse the inside of their treasure.