Once the servant of a being known as Shuma-Gorath, Nightmare realized that his power was far too great for him to be a mere drudge. He escaped Shuma-Gorath by diving into a Splinter Dimension known as the Dream Dimension. Once there, Nightmare took over the realm and grew in power with every horror he cast into a mortal mind. Without knowing, Nightmare soon became dependent on the fear he caused, and soon, he required fear to live.
Nightmare was created by Stan Lee and Steve Ditko and first appeared in Strange Tales Vol.1 issue 110 (1963)
Major Story Arcs
When he began to lose his power due to a lack of fear he was able to maintain in his dimension, Nightmare physically ventured into the human realm. Once there, Nightmare took up the alias "Edvard Haberdash," and took control of a nightclub, renaming it "Club Fear." The club was used to draw in thrill-seekers, and Nightmare would show them their greatest fear for a price. Little did the thrill-seekers know, their fear was feeding Nightmare and increasing his power.
The Great Fear
Since Nightmare is the self-proclaimed nephew of the Dweller In Darkness, he was one of the beings to be summoned to the Dweller's Halls of Fear to form the notorious Fear Lords. After the defeat of four of the Fear Lords (Straw Man, Lurking Unknown, Kkallakku, and Nox), Nightmare had a brief showdown with the Dweller. But when Doctor Strange interrupted the fight, the two Fear Lords once again allied themselves, along with D'Spayre, and began wreaking havoc on the human world. Yet when the fear that Nightmare and the Dweller generated became too much for the humans to handle, they slipped into despair, thus decreasing the power of Nightmare and the Dweller, and increasing the power of D'Spayre. Knowing they could do nothing to stop the now empowered D'Spayre, the other two Fear Lords escaped into their respective realms.
When the Chaos King arrived to usher in the Chaos War, the first realm he attacked would be Nightmare's, taking him by surprise and killing most of Lord Nightmare's minions, before ripping out his heart. As Nightmare begged Chaos to spare him, the King crushed the heart into a bloody haze, killing him and reducing his realm to nonexistence. The damage done deeply effected Doctor Voodoo, Emma Frost, and Marvel Boy.
When Mephisto goes to The Infinite Embassy to learn what the other gods plan on doing about The Serpent, he visits several gods and locations, his last stop being Nightmare's chamber. Still unclear how Nightmare survived the Chaos King, Nightmare explains to Mephisto that the Serpent is starving him by taking all the fear. Nightmare wants to fight the Serpent, but Mephisto talks him out of it, citing that he will lose all respect from the other evil gods. Then, when Nightmare talks of joining the Serpent, Mephisto argues against it, claiming that the Serpent will keep starving him and he will die. Nightmare, unsure of what to do, listens to Mephisto when he advises for him to do what everyone else is doing: stay neutral, and wait for something else to happen.