The lifecycles of Fungi, specifically Coprinopsis atramentaria, are unique in that fact that they have a dikaryon stage included in their alternation of generations.  Other organisms that exhibit an alternation of generations are the fungus Aspergillus fumigatus and the Northern Maidenhair Fern.  But to keep things simple, lets start with the beginning of a single organism, then work our way to the unique phenomena of "going inky."

Asexual reproduction: A haploid spore germinates and begins to grow hyphea which turn into a single primary mycelium.  The mycelium would grow indefinitely and eventually produce spores through mitosis.  Those spores would then create another individual mycelium, and the cycle continues. 

Sexual reproduction: This is a whole different ball-game.  In order for sexual reproduction to occur, two primary mycelia have to make physical contact, in which case the cell walls of the two separate hyphae fuse together (plasmogomy) to create a secondary mycelium.  This secondary mycelium now has two sets of distinct nuclei that it has to accommodate for.  Some fungi simply let the two sets of nuclei replicate and move throughout the organism at free will. However Basidiomycetes are septated, meaning they have partially separated cell-like regions that still have continuous cytoplasmic flow (illustrated to the top right).  Connecting these "cells" are clamp connections that distribute one of both sets of nuclei to each separate region (illustrated to the left).  In this Dikaryon stage, the secondary mycelium continues to grow indefinitely until an environmental factory, like sunlight, or a change in oxygen concentration triggers the growth of a fruiting body i.e. the mushrooms we all know and love.  Once this mushroom gets closer to maturity it starts to line its gills with basidia.  One basidium houses four basidiospores.  Since these are sexual spores, they come about from the nuclear fusion (karyogomy) of the two distinct nuclei, then meiosis followed by mitosis, giving us four haploid spores.  These spores are released at maturity and usually dispersed by wind.  However, Coprinopsis atramentaria has evolved an extreme behavior that assist in more affective spore dispersal.

The picture to the right illustrates the basidia (singluar: basidium) that line the gills.  They house the sexual spores that are made through karyogomy.

Now, it you're interested in its poisonous properties, when ingested with alcohol, click here.