The mechanism is the following:
1) If both of the parents have level 50, their child will get +1 Genetic Power.
If one of the parents is level 50 and the other is not, the child will get +1 Genetic Power if it has more dominant genes from the level 50 parent than from the parent who hasn't reached maximum level.
2) If both of the parents has similar grade of Genetic Power, the child will get this grade and +1 grade if one or both parents have maximum level (according to the first rule)
3) If parents have a difference of 1 grade of Genetic Power, the child will get the grade of the parent from which it inherited more dominant genes.
4) If parents has a difference of 2 or more grades of Genetic Power, the child won't get Genetic Power grade from its parenetes genes, it can get only 1 Grade for parents' level.
So the answers to your examples:
1) lvl50 power2 x lvl50 = Grade 1
2) lvl50 power1 x lvl50 = Grade 2 (if there are more dominant genes from parent with Grade 1) or Grade 1 (if there are more dominant genes from parent with Grade 0)
3) lvl50 power2 x lvl50 power1 = Grade 3 (if there are more dominant genes from parent with Grade 2) or Grade 2 (if there are more dominant genes from parent with Grade 1)
Genetic Power gives +10 bonus to each characteristic for each Grade (in total +60 characteristics bonus for each grade). The other profit from Genetic Power are access to temples which give you items for free if you qualify for their Genetic Power requirements, and the ability to fulfill the most high-paid quests.
