Missingno is nothing more than a placeholder Pokemon for those values in the Hex code in which no other Pokemon appear. Unlike 'M(aka M Block, Mysterio), Missingno doesn't do major damage to your game. It pretty much just screws up your Hall of Fame and can scramble your graphics a bit, but the graphics tend to work themselves out if you go, say, into the Cinnabar Pokemon Center. As for the evolution, I'm not sure if MISSINGNO evolves into a Kangaskan, but I DO know that 'M does if the level 0 version gets experience. However, if you store Missingno in your PC for a period of time(recommended while the game is off, though I don't believe it's a requirement), it will turn into a Rhydon because that's the first Pokemon on the roster with a number of 001 since it was the first Pokemon ever made on the game, though this is based off of the bit roster, not Pokemon list. However, even if it turns into a Kangaskan, Rhydon, etc., most of the time you will not be able to trade it to a G/S/C game because it will appear as "abnormal" to the more advanced games, especially if it still knows two water guns.
I've heard theories that Missingno is a remnant of Mew being removed from the game(and perhaps Marril and Lugia fall under this category), but this is NOT the case as Mew hasn't been removed from the game, it's just not programmed to appear as a wild Pokemon. Missingno is merely a glitch that happens to fill part of the extra 105 bit slots that aren't taken up after putting in 151 Pokemon. Also, have you ever looked upon a caught Missingno's stats and noticed it's a Normal/Bird type? A theory I've heard is that this was how most of the Flying types were labeled in the original translation. Since Missingno wasn't supposed to be caught, they didn't bother changing its old type.
Why does Missingo appear then? When you talk to the Old Man with the coffee in Viridian, the game must store your character's information somewhere because you are suddenly replaced with "Old Man." In order to do this, your character's info is stored in one of the bit slots that is used for finding Pokemon. And why is it that only the East side of Cinnabar Island and one of the strips at Seafoam Island are able to make Pokemon appear there that aren't supposed to? They were programmed to let Pokemon appear, but didn't specify WHICH Pokemon. Because of this, Pokemon from the last area you visited appear. Yay for being able to catch Safari Zone Pokemon without those annoying bait, rock, and catch options! Now, the reason why Missingno will appear is because while there are no Pokemon in Viridian City itself, something went into the game's memory under the Pokemon slot...the character! If you take the time to really study, Missingno actually has several pixels from the character making up its glitchy form. Hence why Missingno appears there and why its appearance is the way it is(unless you're able to find one of the fossil Missingno and/or the ghost one).
And why does Missingno, 'M, and those super-high level regular Pokemon appear at different levels? That is based on the name you choose. Unknown to you, there are actually 11 characters that make up those default names you can choose from. This is done by combining three different names with underscores for each name. When you choose a custom name, there is an "End Name" slot at the end that has a Hex value of 80. (For those of you who don't know Hex, don't worry because I'm not a big expert myself. I only know a bit about it from research on the Missingno mystery.) Because of this, you will always find at least the glitchy, pixally Missingno and it will always have an option of being at level 80. Because I can't post websites on here, I can't send the Hex List that tells you how to determine which Pokemon at what levels appear with your name, but you can contact me if you have questions at either my email, or at MstrHarperofPern for AIM.
This is all I can think of telling for now, but I think it's already more than you wanted to know. XD I hope this helps clarify some details. I've looked through many resources including experiments with Missingno, 'M, and other glitches by people and things written by hackers, and I've done my own experiments.
I am training to be a Glitch Master, baby!