Monsters below A-level can mutate into other creatures through sacrifice. This only works if one creature is sacrificed one at a time, and appears at this time to result in a random new creature which may be of higher tier than the original. The level of the new creature is reset to 1, regardless of the existing level of the mutated creature. When a monster is being mutated, the lightning around the pillars you see in the animation, is blue instead of purple.

The in-game help states that "When you Sacrifice, there is a chance a mutation may occur where the enhanced monster metamorphoses into a different monster. In this case, the level of the mutated monster will go back to Level 1. Please note that mutations will not happen when more than one monster is consumed in a single Sacrifice. It is said that mutations are more likely to occur in Rank C monsters." This appears to imply that mutations are entirely random, affected only by the Rank of the monsters involved.

In short, any C, C+, B and B+ rank monster can mutate, but it has only a ~5% chance to occur. Simply sacrifice two of the same monsters to have a chance of this happening. The result is completely random, you may get a different monster of the same rank or a higher rank. e.g. 2x B+ may get you another B+ monster, or an "A" rank monster