There is an ancient debate stemming back to Tertullian over the creation of human souls. There have been traditionally two schools: the creationists and the traducianists.
The creationists hold that every soul is created ex nihilo at the very moment of conception. God creates out of nothing every single human soul directly.
The traducianists (Tertullian, maybe St Augustine, and most Lutherans) teach that the human soul is generated in the same way that the human body is generated. According the soul of a new baby is created from the composite of the two souls of the parents. Just as the body is created from the previously existing genetic material of the mother and father, so also the soul is generated by the "genetic" material of the souls of the mother and father.
The traducianists believe that since we are conceived in Original Sin then God cannot create the stained souls. God cannot create something blemished. Thus, souls are derived from the previously stained souls of the parents. Traducianism thus relates the transmission of Original Sin as a real metaphysical transaction from body to body, soul to soul.
It should be stated that the Catholic Church formally rejects the traducianist doctrine and is officially creationist, holding that God immediately and directly creates a new soul out of nothingness for every conception.
CCC #366 The Church teaches that every spiritual soul is created immediately by God - it is not "produced" by the parents - and also that it is immortal: it does not perish when it separates from the body at death, and it will be reunited with the body at the final Resurrection.
Traducianism from Wikipedia