Ascended Dragons are a suggested form of currently existing dragons. It would be a fifth phase of their development (egg, hatchling, mature hatchling, adult, ascended). This ascended form would be stronger, fiercer, and have more magical prowess. The method that dragons could become ascended has not been decided upon, however. The two main options would be to either use a magic potion (found either in cave drops, or using a 'search' feature which may or may not be implemented), or to be able to choose to ascend a dragon after a period of time.
It is a very large project, which has been under way for quite some time. It is unknown when the project will be finished. The artists are currently working on the core dragons, meaning dragons released before the Frills.
Due to all the drama about what the sprites should look like and how ascension should work, the old topic with the sprites got moved to the hidden artist section of the forum.
New Ascension Forum Topic: