Most fish hatcheries are built like spillways. They resemble long, rectangular pools, with water flowing in one end and out the other. The hatcheries I've visited are usually near a water source. Fish of similar sizes swim against the flow. They are all fed pellets, probably made from fish meal. When the fish are of size, they are shipped and released into streams, rivers, oceans.
A hatchery fish is easily distinguished from a native fish. (At least an experienced fisherman can distinguish them.) The fins can be underformed. The colors not as bright. The flesh is not as sweet as wild flesh. And, they are voracious. Even I, a technique-challenged fly fisherman, can catch one. The hatchery fish I've caught seem almost... dumb. They ate even the most poorly presented or built fly.
On a scientific level, this may be an important observation. From what I've read, hatchery fish do indeed 'water down' the native gene pool. Yes, they provide meat and take pressure off of wild lineages in the face of declining, healthy habitat. But problems with farm-raised fish abound: hatchery fishes are more prone to disease and parasites; the water they are raised in is Nitrogen rich, which leads to algal blooms and subsequent loss of Oxygen; the fish-meal pellets they eat may have high concentrations of toxic chemicals; they take from 6 to 3 pounds of pellets to grown one pound of flesh (not exactly good for the baitfish populations!); they are not 'wild' and therefore probably not able to migrate like wild stocks - so if they do reproduce, the subsequent fry may be inferior.
Regardless, hatcheries are here to stay. As the human population grows, so does demand for food. Wild stocks might be wiped out if not supplimented by hatcheries. The challenge is making them more environmentally friendly. On that score, there is some good news.
It was recently discovered that circular tanks yeild healtier, stronger fish that have less impact on wild fish. The tanks use less water and are easier to clean. Many problems still remain, but this is at least a step in the right direction.
SIDEBAR: "Four Fish" by Paul Greenburg explores the deep and very complicated relationships between four major foodfish and humans. I have not finished the book, but have found it to be exceptional thus far.