If a horse is carrying the gray gene (G), he will turn gray. It is a dominant colour that trumps everything but the Cream gene (Cr). Homozygous Cream (CrCr - double dilution gene) is the only thing that covers up gray.
This is a Smoky Cream (black + double cream - E? CrCr) who is also carrying gray, & the bottom is a Smoky Cream who is not carrying gray. The gray gene is hidden, so you cannot tell the difference between the two without genetic testing.
Breeding 2 gray horses who have tested heterozygous for gray (Gg x Gg) will give the resulting foal a 50% chance of being heterozygous gray (Gg), 25% chance of being homozygous gray (GG), & 25% chance of not inheriting gray (gg).
Breeding a heterozygous gray (Gg) to a non-gray horse (gg) will give a 50% chance of inheriting gray.
If either parent is homozygous for gray, the resulting foal will be gray 100% of the time.
Gray foals are born looking like a "normal" colour, & will shed out gray. One good indication of weather your foal will "gray out" is to look at their eyes - if they start getting a gray ring of hair around their eyes, that's one of the first signs that he or she will be gray.
Some pics of gray foals:
All gray horses get lighter as they age, eventually looking white. Here's an example of one gray horse & how she changed throughout her life:
several months old - she appears chestnut
3 years old - on the right, next to her dam.
20 years old: