Genotype refers to the number indicating how far down the lineage (or family tree) a racehorse is from its original ancestors.
For example, Z1 is the rarest and gives you the highest chance of having a top-performing racehorse(s). The higher the genotype (or Z number), the lower the chance the racehorse will possess a strong racing ability. Genotype maxes out at Z268.
When breeding two thoroughbreds together, the new genotype is calculated as follows:
Z XXX of stallion + Z XXX of mare
For example, if a racehorse has a genotype Z12 and breeds with a racehorse that has a genotype of Z35, the offspring will now be a genotype of 47 (12 + 35).
It is impossible to breed a ZED RUN racehorse with a genotype of Z1. The lowest possible outcome for an offspring genotype is a Z2, occurring only when two racehorses, both with genotypes of Z1, breed together.