Final answer:
Colonial sea squirts reproduce through asexual budding and sexual formation of gametes. Asexual budding involves the outgrowth of a part of the parent sea squirt's body, while sexual reproduction involves the formation of gametes and the development of a zygote.
Step-by-step explanation:
Colonial sea squirts, also known as colonial tunicates, reproduce through asexual budding and sexual formation of gametes. Asexual budding occurs when a new individual forms as an outgrowth of a part of the parent sea squirt's body. This new individual then breaks away from the parent and develops into a mature sea squirt. On the other hand, sexual reproduction involves the formation of gametes, which combine to form a zygote. The zygote then develops into a larva called a planula, which eventually grows into a new sea squirt.