Horses and Donkeys are found in the Plains biome, if you don't know what this biome looks like then follow this link:http://minecraft.gamepedia.com/Biome#Medium.2FLush_biomes
Donkeys are smaller and have longer ears than Horses, here is a reference:
To breed them you will need 2 golden apples or 2 golden carrots. These are crafted by surrounding an apple/carrot in 8 gold bars. Once you have 2, feed one to the Donkey and one to the Horse and they will breed a mule. Both the Donkey and Horse must be tamed beforehand by repeatedly right-clicking on them with an open hand.
[Credit to Itzz Sh0wt1m3]