Jewel's demon

Jewel's demon is the incredibly powerful dragon yōkai inside the Shikon Jewel, and from his spirit was born Magatsuhi. In the ending, after Naraku's death, he was Inuyasha's last opponent inside the jewel.

Origins
He was the monstrous dragon demon who fought and died with the ancient priestess Midoriko hundreds of years before the events of the series, during the Heian Period of Japan, when the shoguns served as de facto rulers over most of Japan. He was created when many minor yōkai possessed a mortal man who secretly desired Midoriko, similar to how Onigumo loved Kikyo and created Naraku, who formed into one demon in order to kill her.

However, as opposed to Naraku, he was a full demon and not an hanyō. In fact, while Onigumo had been devoured by demons and his soul was used as an adhesive, the man who loved Midoriko was only incorporated on the base of the dragon's neck. Therefore, contrary to Naraku, he was completely devoid of human feelings.

Defeat & Death
The final battle lasted for seven days and nights and eventually he captured Midoriko in his jaws. Midoriko, in one final attempt to defeat him, pulled his soul into her body, fusing it with her own soul, and then expelled them both simultaneously along with her heart.

Both the demon and Midoriko died, but their souls combined to give birth to the Shikon no Tama. Midoriko and him remained imprisoned within the Jewel and continued to battle ever since.

During the story
He was first seen in the mummified corpse of an unnamed but massive demon. The souls of the demons that formed him appear from the Shikon Jewel when a fragment of it gets near his stone body, attempting to escape and revive. Kirara transformed to fight them, but was wrapped by his tail around Kirara and attempted to kill her before Inuyasha fought him off, and he remained inside the Jewel for the time being.

Inside the Shikon Jewel
During the final battle, he was still connected to the Sacred Jewel, and his spirit was still in combat with Midoriko inside the Jewel, like how Naraku was in control of the demons that made up his body. Inuyasha inadvertently dived into the Jewel and encountered the giant dragon-like demon. Inuyasha sliced him immediately with the Wind Scar, and he was split into the many demons that formed him.

The demons stated that Inuyasha did not need to keep searching for Kagome, and says that she'd be here soon enough. He also stated that if Kagome were to make a selfish wish on the Shikon Jewel, Kagome would replace Midoriko in the eternal fight in the Jewel and Naraku would replace him. In the manga, but not in the anime version, his desire expressed by Naraku dissolved forever Midoriko's soul in order to prepare the place for Kagome.

Final Death
Inuyasha refused to believe him, and proceeded to attack the demons that form him in an attempt to reach Kagome in the Meidō outside the Jewel and save her.

In the manga, he and Naraku were destroyed forever by Inuyasha when he cut the point of light in the darkness inside the Shikon Jewel with Meidō Zangetsuha, which was the key to kill Naraku and destroy the jewelry evil. In fact, with Inuyasha's attack at this very point, the purity of the Jewel called Naohi annihilated the evil corrupting presence within it, then the Jewel's shimmering and voice completely stopped.

Instead, in the anime version, when Kagome made the right wish, the demons that form him were enveloped in light, along with Midoriko and Naraku, finally putting an end to his, the Jewel's, and Naraku's evil.

Powers & Abilities

 * Immortality: As being the demon spirit residing within the Shikon Jewel, he is virtually immune to all forms of physical damage. This only sent him back into the evil of the jewel, and thus in the manga his spirit was only finally destroyed when Inuyasha cuts with Meidō Zangetsuha the point of light in the darkness inside the jewel, which is the key to destroy the jewelry evil. In fact, with Inuyasha's attack at this very point, the purity of the Jewel called Naohi annihilates the evil corrupting presence within it, then the Jewel's shimmering and voice completely stopped. Instead, in the anime version, he is destroyed forever when Kagome wished for the jewel to disappear forever which freed all the spirits trapped within it.