Demons are malevolent monsters who appear every so often in the show.
In Lawn of the Dead, after Benny's grandmother's resurrection potion accidentally brought a number of dead animals back to life, their lack of souls caused them to become "a playground for demons," and they became possessed and very dangerous.
Later in Three Geeks and a Demon, Rory accidentally summoned a demon out of a Spirit Speaker. The demon possessed Sarah and went on a small rampage around the house. Benny and Ethan were able to remove the demon from Sarah using the Cubile Animus and a leaf blower.
In Village of the Darned, they encounter Val Mudrap, a powerful demon, who is the keeper of the key to the underworld, who has been luring childeren down for centuries, possing as the leader of the mini moles, she tried to lead all the childeren of Whitechapel down, but was defeated by Ethan when he managed to push her into the door way, and slammed it behind her.
There is much variation amongst demons, the only think that is constant about them is there malevolent, and strive to create chaos and terror. Some are very much animalistic, seemingly posses no real inteligence. While others are more inteligent, and more subtle, and michivious, performing acts the cause problems and discomfate for others, while at the same time appearing somewhat animalistic. Others still are even more inteligent, and able to form complex plans, that cause mass chaos, and perform serious acts, such as mass kidnapping.
In Lawn of the Dead, none of the possessed animals showed any advanced abilities, except for a turtle able to jump at Ethan's neck. However, in Three Geeks and a Demon, the demon that had possessed Sarah also had her fledgling powers, along with telekinesis, super breath and the ability to spew ectoplasm from her mouth.
Muladvarp, was a much more powerful demon, she was able to cast a spell, that took control over all the adults and children in Whitechapel. She could also fire bolts of energy out of her staff.