From PinataIsland.info, the Viva Piñata wiki
This big, beautiful honey-colored gem is actually fossilized tree sap. I once saw a movie where they used something like this to make dinosaurs or something farfetched like that. Don't you wish these people would make a film about realistic stuff, like work out here on Pinata Island?
The amber gem can be retrieved from the wishing well, the first time you throw 9,999 chocolate coins down the well.
Once you've obtained your amber gem, don't rush ahead and tinker the first three bones you happen to find. Take a few minutes to decide what type of Choclodocus you want to hatch, since the color of the skull, ribs, and spine that you store with the amber will determine the shape of its head, shape of its tail, and color of its body.
- The amber gem cannot be sold, smashed, or crated.