According to legend, the Caleuche is a large ghost ship sailing the seas around Chiloé at night; and it is a living sentient being who is conscious. The possessed vessel appears as a beautiful and bright sailing ship, always full of lights and with the sounds of a party onboard, but quickly disappears again, or hiding navigating underwater.
The myths claim it is crewed by the drowned, who are brought to the ship by 3 Chilote mythological figures, two sisters: the sirena chilota (a type of mermaid) and the Pincoya and their brother the Pincoy. Once aboard, the dead can resume an existence as if they were alive again.
In the folklore of chiloé, also say that the evil Brujo Chilote (a type of sorcerer and/or a warlock) likes to visit the party, which they can reach by summoning up magical caballo marino chilote (mythical creature similar to a water horse).
Her crew would also be composed of fishermen and sailors who were kidnapped to serve and work as human slaves, which are transformed into a creature very similar to a Invunche (creature of the Chilote mythology). In fiction
In Alastair Reynolds's Chasm City, Caleuche is the name given to a ship trailing behind a flotilla of colony ships that is not supposed to be there and never responds to communication attempts. When the protagonist takes a shuttle to visit the ghost ship he discovers that it is really a space-faring alien creature that has assumed the appearance of one of the flotilla ships and is trying to hide amongst them from its own enemy.
The El Calueche ghost ship as the titular main setting of the Spanish movie "Calueche".