I vaguely remember something about people using shiny Ditto in Gold/Silver/Crystal to increase the likelihood of shiny offspring.
Was there any truth to this method, and if so, how did it work?
Yes, breeding with a shiny Ditto gives you a 1 in 64 chance that the offspring will be shiny, compared to a 1 in 8192 chance of encountering a shiny Pokèmon in the wild.
In the second generation, whether a Pokêmon was shiny or not is determined by the its Individual Values, or IVs. These are four numbers ranging from 0 to 15, used to determine an individual Pokêmon’s Attack, Defense, Speed and Special stats. A shiny Pokêmon has Defense, Speed and Special IVs of 10, and Attack IVs of 2, 3, 6, 7, 10, 11, 14 or 15. Since Pokèmon found in the wild have uniformly random IVs, this gives an 1 out of 8192 chance of a wild Pokèmon being shiny.
When breeding with a Ditto with another Pokèmon, the offspring always inherits the Defense IV of the Ditto and also has a 50/50 chance of inheriting the Special IV unchanged. The Attack and Speed IVs are always random.
Therefore, with a shiny Ditto, you will always get the correct defense IV of 10, you have a 50% of inheriting the correct Special IV of 10, 1/16th chance of getting a Speed IV of 10, and 50% chance of an acceptable Attack IV. Multiply these probabilities and you get 1/64th chance of a shiny offspring which is significantly higher than the chance of encountering a shiny Pokèmon in the wild.