Ilphyl nods, and starts casting the spell -- a few chanted words and gestures. Then they look at the lizards.

"Hello. My friend wants to find you a home to lay eggs in. What do you need?"

Since the spell mostly just lets Ilphyl understand the lizards and vice versa, Link will be able to understand Ilphyl's questions, and see the lizards' reactions but won't hear the answers. Ilphyl is being courteous and asking the questions in the local language so Link can listen to half the conversation.