A two-headed creature is one skull up on a one-headed version of the same thing. It might be a freak of nature (possibly showing signs of deformity), a superior individual marked by the gods (often showing unusual coloring or marks upon it), or an example of a separate, if related, species (as ettins are to ogres and hill giants).
Two-headed creatures gain a bit more offensive power, but aren’t any harder to kill than their monocranial cousins. Thus most are +1 CR, though those with breath weapons or gaze attacks (anything for which the Two Heads are Better ability applies) become +2 CR due to the increased danger.
If the base creature has a bite attack, it now has two bite attacks.
Because the two-headed creature has two brains, it can easily control multiple attacks without penalty. Two-headed creatures never take penalties to attack or damage from making multiple attacks. As a standard action, the creature can make two attacks. If these two attacks are the same primary attack (two bites, two weapon attacks, two claws) they both add 1 1/2 times the creatures Strength bonus to damage.
Two Heads are Better: A two-headed creature with a special attack based on the head (usually a breath weapon or gaze attack) has two special options. First, it can use just one head to make one of those attacks that normally requires a standard action as a swift action. Alternatively, it can use both heads for the attack, taking a standard action, and increasing any attack roll or saving throw DC of the special attack by +2. If these attacks cannot normally be made every round, the delay before they can be used again is halved.