It’s a theory on the evolution of organelles and it states that some organelles were once independent prokaryotic organisms and that these organisms were consumed by larger prokaryotic organisms.
Endosymbiotic theory is a theory on the evolution of organelles (specialized subunits of cells). It states that some organelles were once independent prokaryotic organisms (ie bacteria) and that these organisms were consumed by larger prokaryotic organisms.
The smaller cells were not digested but instead formed a symbiotic (mutually beneficial) relationship.
Endosymbiotic theory is supported by the striking similarities between some cells. As the illustration below shows both glaucophytes and red algae show evidence of a similar engulfed organelle .
Other evidence for the theory is that one layer of the double membrane of some organelles (such as mitochondria) are of the same nature as the exterior membrane but inverted. This is because in the process of absorption the larger cell’s membrane surrounded the smaller cell’s membrane resulting in a double membrane.
Another piece of supporting evidence also comes from the mitochondria and the fact that these organelles have their own genetic material. Most of a cell’s genetic material is contained within the nucleus but mitochondria contain their own independent genetic material and can replicate independent of cell division.
More information
simple and complete here: http://www.dummies.com/how-to/content/endosymbiotic-theory.html

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