Yes, they're quite convincing! It seems that it's only capable of changing its physical appearance, but according to the Pokédex, it does have an evolved form... I'm not sure what it is yet, but I predict that it will be able to create illusions on a much grander scale once it evolves.

[He sure hopes he's right because that would be so awesome.]

And unlike when you use the move Transform, Zorua keeps its original type and moveset while taking on the appearance of another Pokémon. The only downside is that the illusion will wear off once it's been hit by an attack.