Jewel's demon

Jewel's Demon is the incredibly powerful dragon yōkai who killed Midoriko and whose soul with whom she continuously battles inside the Shikon Jewel. He was created by numerous minor demons who formed into one demon in order to kill Midoriko. His true form is much more monstrous.

Origins
He is the 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 yōkai possessed a mortal man who secretly desired Midoriko, similar to how Onigumo loved Kikyo and created Naraku.

However, as opposed to Naraku, he is 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 is completely devoid of human feelings.

Defeat & Death
The final battle lasted for seven days and nights and eventually Magatsuhi 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 Magatsuhi and Midoriko died, but their souls combined to give birth to the Shikon no Tama. Midoriko and Magatsuhi remained imprisoned within the Jewel and continued to battle ever since.

During the story
He is first seen in manga chapter 89 as the mummified corpse of an unnamed but massive demon.

In the anime versione, 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 transforms to fight them, and they combine into a ghostly Magatsuhi, who wraps his tail around Kirara and attempts to kill her before Inuyasha and the soul of Midoriko fight him off, and he remains inside the Jewel for the time being.

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

The demons states that Inuyasha does not need to keep searching for Kagome, and says that she'll be here soon enough. He also states 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 refuses to believe him, and proceeds 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 cuts the point of light in the darkness inside the Shikon Jewel with Meidō Zangetsuha, which is the key left by Kikyo before dying 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 annihilates the evil corrupting presence within it, then the Jewel's shimmering and voice completely stopped. The rest of the Jewel breaks and then disappears when Kagome makes the right wish for it to be taken out of existence.

Instead, in the anime version, when Kagome makes the right wish, the demons that form him are enveloped in light, along with Midoriko and Naraku, finally putting an end to his, the Jewel's, and Naraku's evil. Inuyasha and Kagome are transported back to earthen ground.

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 left by Kikyo before dying 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 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.