Events of Alan Wake
Alan Wake first encountered the shrouded old women outside the men's restroom in the Oh Deer Diner, not long after he and his wife Alice arrived in the small town of Bright Falls. Wake was looking to get the keys to the cabin the couple were going stay in from Carl Stucky, owner of a gas station that expanded to include cabins. However the old woman, seeming to manifest from the darkness behind him, offered Wake the keys to her cabin on Cauldron Lake. Wake accepted, and the couple set forth to Bird Leg Cabin, situated on the small island of Diver's Isle just on the lake.
Getting settled in, the couple have an argument and Alan stepped outside to get some air. It wasn't long before the power went out and Alice, phobic of the dark, was pulled into the lake by an unknown force. Alan dived in after her only to awake a week later in a crashed car. Emerging from the wreckage, flashes of the old woman's face haunted Alan, and continued to throughout the story.
Finally contacting the authorities, sheriff Sarah Breaker revealed to Alan that Diver's Isle was completely submerged after the 1970s eruption of the volcano beneath Cauldron Lake. Later on, Alan met up with his agent Barry Wheeler who had come across an interesting story while researching Bright Falls. Poet Thomas Zane spent time with his lover and muse Barbara Jagger at Bird Leg Cabin, but one day she drowned in the lake. A week later the volcano erupted and Zane was never seen again.
As Alan Wake continued on his quest to save his wife, the story of Thomas Zane and Barbara Jagger was made clearer. Zane knew that the lake had power. Somehow, creative works made around the lake came to be real, and when his lover Barbara drowned, Zane used the power to try and write her back to life. It worked, but something about her didn't feel right; there was darkness in her eyes.
Convinced that this resurrected Barbara wasn't the same as his muse, Zane tied her down to a chair. Driven to the edge of insanity by the nightmares spawned from his writings, he cut out her heart. To his horror, there was no heart, and the figure before him continued to speak sweet nothings at him. Zane donned his diving suit and embraced his former lover, entering the lake to take the two down where the Dark Presence inside her would be trapped. However, the Dark Presence that wore Barbara Jagger's skin awoke when Alan Wake approached Bright Falls, and continued to appear as an aged Barbara Jagger throughout Wake's journey.