It stores electricity in the electric sacs on its cheeks. When it releases pent-up energy in a burst, the electric power is equal to a lightning bolt.
Biology
(From Bulbapedia)
Pikachu is a short, chubby rodent Pokémon. It is covered in yellow fur with two horizontal brown stripes on its back. It has a small mouth, long, pointed ears with black tips, brown eyes, and two red circles on its cheeks. There are pouches inside its cheeks where it stores electricity. It has short forearms with five fingers on each paw, and its feet each have three toes. At the base of its lightning bolt-shaped tail is patch of brown fur at the base. A female will have a V-shaped notch at the end of its tail, which looks like the top of a heart. It is classified as a quadruped, but it has been known to stand and walk on its hind legs.
The anime has shown that Pikachu sometimes travel in groups. It raises its tail to check its surroundings, and is occasionally struck by lightning in this position. When groups build, they can inadvertently cause lightning storms. Living in forested areas, Pikachu is found foraging for berries it roasts with electricity to make them tender enough to eat. A sure sign that Pikachu inhabits a location is patches of burnt grass. It has been observed eating and sometimes destroying telephone poles, wires, and other electronic equipment.
Pikachu is able to release electric discharges of varying intensity. Pikachu has been known to build up energy in its glands, and will need to discharge to avoid complications. It is also able to release energy through its tail, which acts as a grounding rod, as well as recharging fellow Pikachu with electric shocks. Pikachu can also electrify itself to use its signature move Volt Tackle.
Pikachu is the only known Pokémon capable of using the exclusive Z-Moves Catastropika and 10,000,000 Volt Thunderbolt.
(from Bulbapedia)
Pikachu is based on a mouse after its name. Its cheek pouches were also inspired by squirrels, which store food in their cheeks. The stripes on its back and its lightning bolt-shaped tail were given for aesthetic reasons.
Pikachu's designer, Atsuko Nishida, revealed in an interview that Pikachu was originally a daifuku-like creature with ears. Pikachu's black ear tips are remnants from this original concept.
Name origin
(from Bulbapedia)
Pikachu is a combination of ピカピカ pikapika (onomatopoeia for sparkle) and チューチュー chūchū (the sound of a mouse squeaking).