When the player and their partner volunteer to persuade Rayquaza to destroy a catastrophic meteor foreseen by Xatu, Alakazam and Xatu use their combined Teleport to create the Teleport Gem, capable of taking the player and their partner to Rayquaza's domain, the Sky Tower. The gem is created on the Hill of the Ancients which is where Xatu spends near to all of his time. It is later revealed that the two received help creating the Teleport Gem from "a shy, Ghost type Pokémon", who fled afterwards.
After the events of Sky Tower, the Teleport Gem is kept by the player but is not used due to it having being drained of most of its power. The player must instead use Fly or carry the Fly HM to return to the Sky Tower. It was used again in order to retrieve Latias from Pitfall Valley once the team had ascended from the bottom. What became of the gem after this second use isn't known.
Although Gengar helped create the Teleport Gem, Gengar cannot learn Teleport.
This is the second of four times that the Hill of the Ancients is seen. The first is after first completing the Great Canyon, the third is after first completing the Sky Tower and the fourth is when the team asks of the mirage Pokémon. It is not visited after the fourth time.