Attack and Defense greatly affect damage.
There is an equation used by the game, but it never reveals exactly what that formula is. However, after lots of testing I believe we've finally figured out what that formula is. You can see how it was done on Reddit here!
Damage = Floor(0.5 * (Attack / Defense) * (CpM_Atk / CpM_Def) * STAB * Type * Power) + 1
- Floor(...) : This is a math function were the result is always rounded down.
- Attack : This is the total attack stat of the attacker (base attack + attack IV).
- Defense : This is the total defense stat of the defender (base defense + defense IV).
- CpM_Atk : This is the CP_Multiplier based on the level of the attacker.
- CpM_Def : This is the CP_Multiplier based on the level of the defender.
- STAB : This is the Same-Type Attack Bonus, which is equal to 1.25. It is only applied if the type of the attack move is the same as one of the attacker's types.
- Type : This is the type effectiveness of the attack, which can be either 0.64, 0.8, 1.0, 1.25, or 1.5625, depending on whether the attack is "super effective" or "not very effective".
- Power : This is the base power of the move used by the attacker.
Note: Testing has determined that critical damage is not currently implemented in Pokemon GO, so it is not included in the formula.
Note: Some versions of the formula do not have "CpM_Atk / CpM_Def". This means that those numbers were already factored into "Attack / Defense". I choose to separate these so that it is more clear how a pokemon's level affects damage.
Extra Information
The base Attack and Defense stats for all pokemon: here.
The CP_Multiplier for each pokemon level: here.
The type effectiveness for all 18 types: here
Information about what IV's are: here.
Example #1
Attack = 100
Defense = 50
CpM_Atk = 0.7317 (level 30)
CpM_Def = 0.5974 (level 20)
STAB = 1.25
Effectiveness = 1.25
Power = 25
Damage = Floor(0.5 * (100 / 50) * (0.7317 / 0.5974) * 1.25 * 1.25 * 25) + 1
Damage = Floor(0.5 * (2) * (1.2248) * 1.5625 * 25) + 1
Damage = Floor(1.9138 * 25) + 1
Damage = Floor(47.845) + 1
Damage = 47 + 1
Damage = 48
Example #2
Now for a real example, and I will go into much more detail this time. Let's say a level 20 Venusaur attacks level 20 Bulbasaur with Razor Leaf. Let's also assume Venusaur's IV's are all 12, and Bulbasaur's IV's are all 9.
Attack = 210
Venusaur's base attack stat is 198. Its Attack IV is 12, so we add those together to have a combined attack stat of 210 (198 + 12).
Defense = 135
Bulbasaur's base defense stat is 126. Its Defense IV is 9, so we add those together to have a combined defense stat of 135 (126 + 9).
CpM_Atk = 0.5974
Venusaur is level 20, and the CP_Multiplier for that level is 0.5974.
CpM_Def = 0.5974
Bulbasaur is level 20, and the CP_Multiplier for that level is 0.5974.
STAB = 1.25
Venusaur is a Grass/Poison type pokemon. Razor Leaf is a Grass type attack. Since the attack type matches one of Venusaur's types, the attack deals bonus damage.
Type = 0.64
Vine Whip is a Grass type attack being used against a Grass/Poison type pokemon.
Grass type attacks are not very effective against Grass type pokemon (x0.8).
They are also not very effective against Poison type pokemon (x0.8).
These two damage multipliers combine to make the attack double ineffective. 0.8 * 0.8 = 0.64.
Power = 15
The base damage for Razor Leaf is 15.
Damage = Floor(0.5 * (210/135) * (0.5974 / 0.5974) * 1.25 * 0.64 * 15) + 1
Damage = Floor(0.5 * (1.5556) * (1) * 0.8 * 15) + 1
Damage = Floor(0.6222 * 15) + 1
Damage = Floor(9.333) + 1
Damage = 9 + 1
Damage = 10
Example #3
Now let's do the reverse of the above: Bulbasaur attacks Venusaur with Razor Leaf.
Attack = 135 (126 + 9)
Defense = 212 (200 + 12)
CpM_Atk = 0.5974 (level 20)
CpM_Def = 0.5974 (level 20)
STAB = 1.25
Type = 0.64
Power = 15
Damage = Floor(0.5 * (135 / 212) * (0.5974 / 0.5974) * 1.25 * 0.64 * 15) + 1
Damage = Floor(0.5 * (0.6368) * (1) * 0.8 * 15) + 1
Damage = Floor(0.2547 * 15) + 1
Damage = Floor(3.8205) + 1
Damage = 3 + 1
Damage = 4
Summary
Example 1 showed how both attack/defense and level affect damage.
Example 2 & 3 showed that when pokemon are the same level, attack and defense play a large role in damage. Venusaur did 10 damage to Bulbasaur with Razor Leaf, while Bulbasaur only did 4 damage with the same attack.
The formula also shows why Magikarp deals damage even though Splash has a base damage of 0. One damage is always added onto the end of every attack.
Before the first update, the 'nearby' tab (or more formally known as the tracker) used to show nearby Pokemon with either 1, 2, or 3 footprints. These footprints would show how far a nearby Pokemon was to you, with 1 footprint being the closest and 3 being the furthest.
Since the most recent update, Niantic has removed the footprint tracking features of the tracker, due to its inaccuracy. Now the 'nearby' tab just shows Pokemon that are nearby without any metric of how far away they are. It is a little unclear, but many speculate that if a Pokemon appears on the 'nearby' tab that it is within 200m of your position.
Here's a related question that shows how the tracker worked before the update: Why should I "watch" a nearby pokémon?
As for the greyed out shapes on the 'nearby' tab, those refer to Pokemon that you haven't caught yet. When you first start the game, all of the Pokemon on the tracker appear as grey shapes (except for who you picked as your starter) until you catch them. Once you catch a Pokemon of that variety, it will appear colored-in on the tracker next time you see it. This is especially important because uncaught Pokemon species reward you with an extra +500xp when you catch them, so you generally watch to catch Pokemon that you see greyed out on your tracker.
Best Answer
Yes it does, I've tested this many times on pokemon I've evolved and it is 100% the same.
Source: Personal experience