The Dweller-in-Darkness was a demon from the dimension Everinnye, like the demon Nightmare. The Dweller became shunned by his people for following "The Way of the Shamblu". Like Nightmare, the Dweller fed on the fear of living beings; fear both increased his powers and kept him alive.
In the universe which existed before the current reality, the Dweller caused a fracture in the M'Kraan Crystal in order to bring about the destruction of the universe and absorb the fear this would cause in every being that existed. Just before the crystal shattered, however, the Phoenix Force telepathically reached out to the minds of all life and united them in peace, foiling the Dweller's scheme. As the universe came to an end, the current universe was born, with its own incarnation of the Dweller.
In this new universe, when he first came to Earth, the Dweller-in-Darkness fed upon the fears created by the war between the humans of Atlantis and the Deviants of Lemuria. The Atlantean sorceress Zhered-Na discovered the existence of the Dweller and banished him with the help of Agamotto and the Atlantean god Valka. When Atlantis sank, the Dweller absorbed the fear of the inhabitants and used it to create D'Spayre and ordered him to kill Zhered-Na in revenge. D'Spayre manipulated a tribesman to kill Zhered-Na and Zhered-Na's student, Dakimh the Enchanter battled D'Spayre over the next millennia, while D'Spayre tried to generate enough fear on Earth to free his creator. During this time the Dweller created other beings with a similar purpose, including the demoness Spite. D'Spayre remained his most powerful creation though.
In the 20th century, the Dweller appeared in the dreams of many humans and told them that they would gain eternal life if they died. These humans would then kill themselves but turn into Shade-Tralls, powerful creatures who served the Dweller, but were vulnerable to light. His plan was stopped by the gods Thor and Hercules who fought the Shade Tralls and destroyed them. He also inspired Zolton Drago to become the first Mister Fear.
The Dweller created new Shade Tralls. These Shade Tralls were destroyed by Doctor Strange and Clea, but not before the Dweller finally freed himself from his prison. The Dweller witnessed the destruction of his Shade Tralls by Strange and Clea and determined that they were the largest threat to him on Earth. Over the next few months he tried to kill Strange using servants like the Dream-Weaver and several demons, but Strange defeated them all. Still, Strange's resolve was sapped by the Dweller's servants and he was overcome with fear. The Dweller decided that he had defeated Strange and stopped his attacks.
Months later, the Dweller gathered the Fear Lords and told them about his plans to create the Great Fear: a terror which would engulf humanity. In fact, the Dweller hoped that the other Fear Lords would be destroyed during this plan by Doctor Strange. Most of the Fear Lords agreed, but the Straw Man, who was benevolent to humanity, disagreed with their plan and warned Strange. The Fear Lords destroyed the Straw Man before he could tell Strange too much, but they only killed one of the Straw Man's many bodies. The Great Fear started out as the Dweller had planned; several of the Fear Lords were destroyed by Strange and his allies, but D'Spayre told Nightmare about the Dweller's true plans. Nightmare and the Dweller fought, but during their battle they generated so much fear that humanity stopped fearing and started to despair. The two were unable to feed upon this despair, but D'Spayre was and he become more powerful than the two of them. Realising that D'Spayre had manipulated them, the Dweller attacked him, but D'Spayre destroyed the Dweller's robotic body. His head, the only living part of the dweller escaped.
Powers and Abilities
The Dweller has the ability to generate fear in other living beings. This fear in turn sustains and empowers the Dweller, allowing him to generate even more fear. He also has other undefined mystical powers: he can create independent creatures out of fear like D'spayre and he can turn humans who die under his influence into Shade-Tralls, beings made of shadow with superhuman strength. Strong light can kill or banish these tralls. The Dweller is immortal, doesn't age and even the sorceress Zhered-Na, assisted by powerful beings like Agamotto and Valka, could only banish him, not destroy him. The "Way of the Shamblu", the Dweller's chosen path in life, involved a ritual where the Dweller removed his head from his own body. His body died, but his head lived on, now as a corporeal being, whereas the other inhabitants of Everinnye are more ethereal. The Dweller's head is attached to a robotic body, which possesses superhuman strength, but it can detach and move with the tentacles near its mouth in case of emergency.