In order to better understand their own nature, Organization XIII sought to perform research on the nature of Nobodies and the mechanics of memories, with a secondary, secret purpose for Xemnas of uncovering "something important related to 'memory'". To this end, they conducted experiments located at Castle Oblivion, a location that affects memories, and involving Naminé, a Nobody who affects memories. They constructed the Pods as part of these experiments into breaking and recovering memories.
After defeating Marluxia, Sora meets with Naminé in a room within Castle Oblivion and she offers to reconstruct his memories. However, due to the extent of the damage, he, Donald, and Goofy would have to go into stasis within the Pods, in order to keep them safe and cared for while Naminé conducts her task.
After defeating the Riku-Replica within the castle's Twilight Town-styled basement, Riku meets with Naminé and is shown Sora sleeping in his Pod. Naminé offers to use her powers to seal away Riku's memories, permanently locking away Ansem, but Riku refuses, and instead asks her to promise to look after Sora.
DiZ works with Naminé to restore Sora's memories as he slumbers in the Pod. He persuaded her to move the Pods to his secure laboratory in the basement of Twilight Town's Old Mansion, as Castle Oblivion was too at risk to intrusion by Organization XIII. During the reconstruction, he digitized himself and his research on Roxas, Axel, Naminé, Xion, Terra, Ventus, and Aqua, and hid them within Sora's memories, hoping they could eventually be used to find these lost friends. 
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After being placed within the simulated Twilight Town, Roxas begins reliving Sora's memories in earnest, via his dreams. One of these dreams includes a distorted memory of Sora meeting with Naminé at Castle Oblivion—in this version of the memory, he reaches her room at the top of Castle Oblivion, but she surprises him by drawing a sketch him inside of a Pod, which then sprouts around him and closes.
On the last day of Roxas's summer vacation within the simulation, it is attacked in earnest by Axel and the Organization's Nobodies. DiZ calls him to the Old Mansion, so Roxas makes his way there. He fends off the Nobodies as he explores the building, and eventually discovers DiZ's basement laboratory. He passes by Donald and Goofy's Pods in the Basement Corridor, stirring recognition, before reaching the Pod Room presided over by Sora's Pod. DiZ sends a digital projection of himself into the simulation to confront Roxas, exhorting him to rejoin with Sora so that Sora will have the power to destroy the Organization. Roxas attempts to attack the projection, but it merely vanishes. With Roxas there and Naminé's work done, Sora's Pod opens and Roxas is absorbed back into him, as the boy accepts his fate.
At the same time, in the real Twilight Town, Sora and his friends awaken within their Pods and emerge, marking the start of a new journey. Upon closer inspection, Sora and his friends discover that the other pods situated in the laboratory had been previously used by unknown parties, and had been powered down.
Sora's Pod, watched over by Naminé, appears in the Journal's data reconstruction of Castle Oblivion just as it was when the original Sora met with Naminé.
The Pods are crystalline devices that resemble a marble structure in the shape of an lotus flower bud while closed. They open by "blooming", revealing a crystalline chamber within covered by circuitry. The crystal is usually transparent when not in use. The interior of the pods is completely black and gives the illusion of a large, shadowy room.[?] They can come in multiple sizes, as Donald and Goofy sleep within small Pods arranged in rows in the Basement Corridor, while Sora sleeps within a much larger Pod placed by itself in the Pod Room.
The Pods' physical resemblance to the lotus flower may be an indirect reference to the unrelated lotus tree, which in Greek mythology was said to cause those who ate it to forget their friends and homes, and lose their desire to return home, similar to the Organization's manipulation of Sora in Kingdom Hearts Chain of Memories.
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