For the same reason why a Wailord fits in a Pokeball that's smaller then your hand: it's an alternate dimension that is totally different then ours.
In a world where people don't sleep, eat, drink, breath and rest, animals keep getting caught all the time and don't get extinct, cute animals are used for slavery and everyobdy is okay with that, a green wingless snake is able to fly and where it is able to it rain, hail and the sun shines brightly inside caves, this isn't really that weird.
Edit: I think that Eggs are also kept inside Pokeballs and that the egg can be as big as a car.