A rabbit needs one copy of the gene to be considered a true dwarf. This is what the breeders want as it goes with the breed standard. There are some other breeds that also have the dwarfing gene.
If 2 rabbits with the gene are bred together, there is a 25% chance that a kit won't have the gene, 50% that it will and 25% that it will get 2 copies of the gene. This goes for each kit, not the litter as a whole. Babies with 2 copies of the gene are called peanuts and do not survive. Some might last a couple week, but that is usually it. You can breed a rabbit without the dwarf gene to a rabbit with it and end up with some that have the gene and some that don't, but would not have peanuts. There can be some that carry the gene, but don't express it and that can lead to the offspring getting the gene.
If you bred 2 rabbits without the gene, the offspring would not have the gene. However, they are a bit bigger than what is 'normal' for the breed and that is not ideal for showing. It would be possible in just a few generations to not have the gene. If that did happen on a large scale, the Netherland Dwarf and other breeds with the dwarf gene would not exist as they do today.
