To use the Hybrid Crop Generator, select the two crops you wish to mix together from the drop down menus to the left. The resulting plant will appear over here on the right side.
There are a lot of 2nd generation hybrid crops that can be mixed together, but there are only 24 3rd generation crops you can produce. Some of the combinations will result in the same 3rd generation crop, while other mixes will only return one of your original 2nd gens. When you discover a 3rd generation crop, Tsurudan will ask you to name the new seeds.
Some of the 3rd gen crops will cut their growing cycles really close to the start of the next season. Each 3rd gen will only grow during one season so if it doesn't produce before the next season begins, your special plant will die. Tsurudan will tell you what season the crop will grow in or you can find out by pressing the Y button when the seed is selected in your rucksack.
If you are worried that you might loose your special crop, before you plant the seeds do an enhancement with a Happy Lamp flower. The special ability of the Happy Lamp will allow your crop to grow in any season. If it is still growing at the first of the new season, the Happy Lamp will ensure that it doesn't rot before you can harvest.