Demons are a second-tier ascention based around Death Magic, or dark soul energy. Contrary to common misconceptions, however, they aren't actually undead, and do have souls. All but the weakest of demons almost always have some sort of Soul Magic of their own, and they use soul bonds readily, refering to them as "selling one's soul", but the soul doesn't actually leave it's body. Their form varies widely depending upon their Talents, and is very different from their mortal form. Like most ascensions, they revert to their natural form under raw Change Magic.
Becoming a demon is much easier than becoming an angel. Many people get there directly by simply selling their soul to another demon. It can also be achieved by channeling excessively in the Abyss, which floods the body with dark soul. This will often cause death, however, unless the person reaches a state of rage at which they completely lose control. Demons are made through anger, pain, hatred, lust, and sadistic pleasure.