Left:  A poster for the fourth movie.
Right:  The American poster.  Click on it to see a full-size version.
 

In the water capitol of Alto Mare, there's a legend that states that a kindly couple took in two children who had been left on the shoreline.  The two children turned out to be the legendary pokemon Latios and Latias, and legend has it that they saved the city from a dark rain.  In addition, they gave the elderly couple the "Drop of the Heart" to thank them for raising them all those years.  The pokemon vanished, and ever since then the city has viewed the pokemon as gods.  In the present-day, two famous thieves, Zanna and Lyon, read the story and decide to steal the Drop of the Heart for themselves.

Meanwhile, there's a big festival in the city celebrating the legendary pokemon, and during the festival is a water race.  Two of the participants happen to be Satoshi and Kasumi, and as the two race they are being watched by Latias and Latios.  The race ends with Kasumi being victorious, so she and her friends are rewarded with a tour of the island.  As they go on their tour, Zanna and Lyon use a special device to locate the legendary pokemon who will ultimately lead them to their treasure.  They know that the pokemon are able to take on a human form, so they need a special machine to get past the pokemon's cloaking abilities.  They soon find their target and attack her with their pokemon.  Satoshi steps in to help the pokemon (who's disguised as a young girl named Kanon) and successfully wards the two thieves off. 

After the encounter, Satoshi-tachi decide to visit the city's museum, where a man named Bongore shows them the city's defensive unit.  While inside, Satoshi sees the girl from before and tries to catch up with her.  Along the way he keeps seeing two versions of the girl--one with a beret and sketchbook and one without--until finally he arrives at a secret garden.  There, it's revealed that the girl without the beret is really Latias, and that both she and her brother Latios live in the garden with Kanon, the girl with the beret.  Latios scolded Latias for going out in public, but it is explained that it just wanted to play with Satoshi.  Satoshi is then shown the location of the Drop of the Heart and that the two pokemon are able to sense what the other senses.  The young pokemon trainer plays with Latias until nightfall, when he has to meet back with his friends. 

That night, Zanna and Lyon head to the garden to steal their treasure.  After weakening the two pokemon, they steal the Drop of the Heart, take Latios with them, and head for the huge machine in the museum.  Once there, Lyon uses the pokemon and their treasure to operate the machine, resurrecting the fossils of two ancient pokemon present in the museum.  Latios transmits all of this information to Latias, who goes to Satoshi-tachi for help.  Satoshi, riding on Latias, is able to reach the museum despite an onslaught from the Ptera and a Kabutops that had been revived. 

Satoshi-tachi is able to both disrupt the machine and free Latios, acts that caused the Drop of the Heart to turn a purple color.  Zanna touches the orb, which causes a reaction that makes the waters surrounding the city go crazy.  As giant tidal waves threaten to crush the city, Latias and Latios fly into the air and combine their energies to stop the tsunami.  However, because so much of Latios' energy had been drained by the machine inside the museum, it is too weak to survive the rescue.  Latios sacrifices itself to save the city, creating a new Drop of the Heart in the process.  The mourning heroes place the new Drop of the Heart in the secret garden, restoring the balance of nature.  With Zanna and Lyon now in jail, Satoshi-tachi take a boat back to the mainland and bid their friends goodbye. 

The Pichu Brothers (from the "Pichu and Pikachu" mini-movie) are riding a train one day when they are thrown off the roof.  After crashing into a Sonano, they land on a campsite where all of Satoshi's pokemon happen to be hanging out.  Together, the pokemon explore the camp as they struggle with an Usokkii, get chased by the spooky Yomawaru, and have an exciting adventure inside a windmill.  After a rainy night, the pokemon see the train that the Pichu were riding before and rush to try to catch it.  With the help of Sonano's friends and the rest of Satoshi's pokemon, the two Pichu are able to catch their train and bid their friends goodbye.

The inspiration to make the city capital of Alto Mare into a water-city came from a trip Kunihiko Yuyama took to Venice, Italy.

The American version debuted in 196 theatres nationwide, quite a bit fewer than the 249 theatres that Pokémon 4Ever got.  The film earned $260,372 on its opening weekend, placing in 19th place in the box office.

The anime producers have hidden the previous movies' star pokemon in the background of a few scenes.  Here are their locations, with pictures provided thanks to Murgatroyd. 

Thanks to Pokemonica for the above staff list.