A Demon is a very dark and powerful spirit that possesses substantial supernatural powers. On the HBO original series True Blood, the nature of demons remains unknown, however, it is possible that like faeries, demons are a race of supernatural beings that are native to another dimension.
In "The Southern Vampire Mysteries", the series of novels in which True Blood is based, demons are a species of fae, and appear to be the counterpart to fairies. In the book series, demons possess superhuman speed and strength that is comparable to vampires, control over fire and heat, as well as telepathy. A demon granted Sookie's family the potential for telepathy in the novels.
Demons are known to possess their own sources of magical powers as Jesus, Marnie, and Lafayette used demonic magic on several occasions. Some witches, especially Latino witches called "brujos" (Spanish for "witch"), have been known to summon demons as a means to enhance their power. They are shown to be capable of overpowering even the most powerful of vampires, as Marnie was able to use Lafayette's demonic abilities to apprehend and nearly kill Eric and Bill. They are particularly well-known for their pyro-kinetic abilities.
While demons appear to be obedient to their summoner, they are also very violent and cruel by nature. This malicious nature can make them difficult to control and lead to unwanted releases of power. A brujo by the name of Jesus Velasquez has reluctantly summoned demons for help in extreme cases of emergency, and his bloodline is the first to feature demons throughout.
Searching for help to protect themselves against vampire Eric Northman, Jesus and Lafayette travel to Mexico to meet Jesus' grandfather, Don Bartolo, a powerful brujo adept in the dark arts with a demon inside him as well as Jesus. He summons his demon side while making a snake bite Jesus' neck. ("I Wish I Was the Moon")
Without Antonia, Marnie, now a ghost herself, possesses Lafayette in order to force Jesus to give up his demon to her. Marnie succeeded, and in the process killed Jesus. Marnie uses the demonic powers to attack and nearly kill Bill Compton and Eric Northman, but is stopped by Antonia herself (summoned by Holly Cleary, Sookie Stackhouse and Tara Thornton). Though Marnie crossed over, the demon remains with Lafayette. ("And When I Die")
Jesus' demon is still in Lafayette and is being drawn out when Lafayette experiences anger, causing him at one point to curse Sookie's car and nearly kill her. Lafayette then attempts to summon Jesus, seeking help in expelling the demon from him, only to see Jesus head appear with his mouth sewn shut. Ruby Jean tells Lafayette that Jesus is in danger with Don Bartolo. While at the sorcerer's house, Bartolo attempts to steal Jesus' demon out of Lafayette, but Don's wife kills him in the process.
Due to the fact that hell is nonexistent in the True Blood universe, it is most likely that demons are native to an extraterrestrial dimension, as oppose to the biblical underworld that most people believe. As spiritual beings, demons are truly immortal and cannot die or be destroyed. However, if a demon were to be defeated, it is most likely that the demon's essence would simply return to its original realm.