Here's a theory I came up wit on the forums to explain animals in the Pokemon world. Note: Pokemon compeiting with animals is not my idea. The gradual extincion is.
Re: So, are humans on Poké Earth human, animals or are they Pokémon?
I have a theory. So according to the manga, pokemon aren't from Earth. Now animals went through a mass extinction when pokemon arrived and started filling up niches in nature ( plants survived because no pokemon grows in the ground so there