Allison Hayes was a teenager being targeted by Freddy Krueger. She was born with extraordinary abilities which made her a "Dreamstalker", with the ability to control her dreams. Ever since she was a little girl, she had had this power, and wandered into different parts of the Dream Dimension. Unfortunately, Dreamstalkers are prone to being easily manipulated by beings who exist in the Dream Dimension and easily fooled into thinking an evil being is a good one.
Allison had no idea of this at first, and when being treated for her nightmares by Dr. Julianne Quinn, demonstrated her abilities when she entered one of Quinn's dreams and saved her from Krueger by taking the form of a living fireball, then a female wrestler. Julianne learned what Allison was after talking to a friend of hers in Mexico who was an expert on dream myths, and planned on warning Allison about her vulnerability, but she was killed by Krueger before she could do this.
Allison reveled in her powers as the Dreamstalker, even spending waking hours drawing new identities she could change into in her dreams. One of them was her dressed in Krueger's own clothes.
Her epic battle with Krueger and a now evil Julianne unfortunately caused her to sleepwalk, and she was woken up and dragged off to solitary. Krueger had also previously been unaware of her powers, but learned of it in this battle. It is unknown if Allison defeated Krueger, or if she succumbed to his influence, as she made several quips when battling him that were similar to ones Krueger had made previously. The third issue was never published.
The character of Allison has similarities with the Nightmare on Elm Street film characters of Kristen Parker from Dream Warriors (Particularly in her artistic abilities and bond with her psychiatrist/mentor) and Alice Johnson ('the Dream Master") from the fourth film Dream Master, and some of her punk-inspired proposed appearances for her Dreamstalker identity resembled Taryn White's "beautiful and bad" alter ego from Dream Warriors. Allison is named after actress Allison Hayes, who appeared in many horror films, notably the titular role in the 1958 camp classic Attack of the 50ft Woman.