Sheogorath is the infamous Prince of Madness, whose motives are unknowable. His realm in Oblivion is The Shivering Isles, and is served by the Golden Saints and Dark Seducers.
Sheogorath savors the act of driving mortals insane or making them perform actions that may be seen as trivial or silly. Sheogorath speaks with an almost exaggerated Scottish accent in the Shivering Isles. His favored weapon for mortals is the staff Wabbajack, which can transform any living NPC creature into another random creature.
Another artifact known as the Staff of the Everscamp, which the owner cannot discard, causes the owner to be constantly followed by four scamps. There is also a region in Morrowind named after him, Sheogorad. There are many Daedric shrines there, many of which are shrines built specifically for his followers to worship him. As the Madgod, Sheogorath himself considers madness to be a form of mercy for those who would otherwise not function in the world — “a bitter mercy, perhaps, but a mercy nonetheless”.
Sheogorath came into existence with Nirn as the “Sithis-shaped hole in the world.” It is learned in Shivering Isles that the other Daedric Princes feared the Daedric Prince of Order (Jyggalag) was becoming too powerful, and so they cursed him into a body of madness (Sheogorath), everything he stood against. Though Sheogorath seems to prefer this new existence and to care in his own way for the residents of the Shivering Isles, Jyggalag is nonetheless able to return at the end of every era, leading a “Greymarch” (destruction of the realm using the Knights of Order). The curse would then revert him to Sheogorath, leaving Sheogorath to once again re-assemble his realm.
Not wanting to see his beloved Shivering Isles destroyed again by the Greymarch, Sheogorath called for a champion from Nirn. At the end of the 3rd Era, Jyggalag was struck down by Sheogorath’s Champion. With this, the Greymarch was ended prematurely, releasing Jyggalag from the cycle, and the Hero was crowned the new “Sheogorath." Jyggalag says that the hero may one day grow into their new role.
In Morrowind, Sheogorath is known as one of the "Four Corners of the House of Troubles.”
Sheogorath reappears in Skyrim in the quest, The Mind of Madness, which has an improved Wabbajack as its reward. He makes references to the Oblivion Crisis, stating that he had a personal involvement, possibly revealing that he is indeed the Hero of Kvatch ascended to godhood.