Spike was shown being hatched in the episode The Cutie Mark Chronicles by Twilight Sparkle during her entrance exam to Celestia's School for Gifted Unicorns.
Spike has the ability to transport scrolls back and forth between Twilight Sparkle and Princess Celestia. He sends notes by breathing magic dust onto them and blowing them into the breeze. He receives notes by belching them up.
Baby dragons such as Spike typically dine on precious gemstones, such as rubies, sapphires, emeralds, etc. However, living in Ponyville, Spike has to sometimes settle for more Equestrian meals, such as hay fries (he likes his extra crispy).