Hou Chi is actually reborn from part of Shang Gu's spiritual strength. During the Tribulation of Chaos, Shang Gu sacrificed herself to protect the world. Bai Jue was unwilling to let her die just like that. He kept part of Shang Gu's spiritual strength and nourished it together with Gu Jun. After tens of thousands of years, Hou Chi was born and became Gu Jun's daughter. Gu Jun used to be in a relationship with Wu Huan then and Hou Chi was made out to be their daughter.
Bai Jue had sealed Hou Chi's spiritual strength when she was born as Shang Gu's last wish was to live an ordinary life rather than bear the heavy responsibility of being a goddess. That is why Hou Chi has weak cultivation powers.
Hou Chi died after delivering her son and re-awakened as Shang Gu in Episode 43. This is after Gu Jun returned Shang Gu's original being into Hou Chi's body in Episode 41. He did it to keep Hou Chi and the baby alive after a sneaky attack by Wu Huan.
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ANCIENT LOVE POETRY (千古玦尘)
FantasyShang Gu, once a leader of the four immortals, who falls into a deep sleep after sacrificing herself in a trial that lasted 60,000 years. Shang Gu wakes up many years later, and memories of what happened 300 years ago were completely wiped. But her...
