Hidden far below the depths of Cauldron Lake in small town Bright Falls, the Dark Presence, a nightmarish and mysterious force slept. Whether the Dark Presence had anything to with the strange nature of the lake itself, namely it apparent ability to make any creative fiction a reality, is unknown. However the force seems to be bound to the area around the lake, a shackle it seeks to escape from throughout the decades.
Unaware of the terror below but knowing of the lake's power, poet Thomas Zane spent many days on the lake writing, his lover Barbara Jagger with him. When Jagger mysteriously drowned, Thomas Zane used the lake's power to try and write his love back to life. She returned to him, but not as she had left him. The resurrected Jagger insisted that Thomas Zane continue writing, his words giving birth to things more and more nightmarish. Realizing that this Barbara wasn't his love, Zane bound her to a chair and cut out her heart. To his surprise, there was nothing there but darkness.
Realizing that this darkness inside her was influencing his writing so that it could empower and free itself, Zane sank himself and Barbara Jagger's body to the bottom of Cauldron Lake. Not long after, the island of Diver's Isle that sat on the lake, along with the cabin Zane and Jagger spent their time in, was completely submerged as the Dark Presence raged. Unable to figure out what had happened, baffled scientists assumed it was a previously-undiscovered underwater volcano erupting. For a time, Zane's hope was realized. The Dark Presence slept deep beneath lake. At least until Alan Wake approached Bright Falls.
Events of Alan Wake
The Dark Presence, under the guise of an aged Barbara Jagger, offered Alan Wake a place to stay: Bird Leg Cabin on Diver's Isle. The same cabin that Zane and Jagger stayed at, and was subsequently destroyed by the eruption. Alan and his wife Alice arrived at the cabin, but while the two were separated, the Dark Presence pulled Alice into the lake. Alan, rushing to her aid, saw a figure in the water and dove in fearing the worst.
Unable to find his wife in the blackness of the lake at night, Wake emerged and was met by the Dark Presence, appearing again as Barbara Jagger. It told him of how it was his fault that she died, but that he could still save her. If he started writing, it insisted he could bring her back. Touched by the Dark Presence, for seven days Alan Wake wrote under its gaze. It whispered to Wake, making sure the story he was writing would increase its power and set it free.
However Alan Wake was able to write his escape into the story, and the light of Zane was written in to come set him free. In his diving suit, Thomas Zane appeared and set Wake free from the Dark Presence's hold. As Zane collected the nearly completed manuscript, the Dark Presence returned to Bird Leg Cabin and confronted him. Zane managed to weaken it long enough for Wake to recover that night, while Diver's Isle dissolved into darkness.
It was that night that Alan Wake awoke from a car crash without recollection of the past week. While he continued his search for Alice, the Dark Presence regained its strength, as the story Wake had written dictated. It tried to guide Wake back under its control, but eventually he came to know too much about it and its ambitions; he had to be stopped.
Wake fought his way past the Taken and the objects the Dark Presence threw in his way, finally reaching Cauldron Lake, the clicker in hand. Still in the form of Barbara Jagger, the Dark Presence protected itself with a violent tornado, but Wake was able to subdue it and jump into the lake. In the dark world of ideas under the lake, he made his way to the submerged Bird Leg Cabin and confronted the Dark Presence.
It told Wake that he would never get Alice back, its voice no longer that of Barbara Jagger, instead an imposing and godly bellow. It told him that "I am older than you, older than your first work of art" and that it would find a new face to wear. Another would dream it free. Wake put his hand clenching the clicker in the gaping hole where Jagger's heart would be and used it. Creating a new heart of light, the brightness burst through Jagger's body, dissolving as the other Taken did once defeated.
While it's exact origin is unclear, the only potential references to the Dark Presence's nature are its final words to Alan Wake. It says that it is much older than Wake and also that it is older than "your first work of art". It could be that it was specifically referring to Alan Wake's first work of art, or it could refer to all of humanity, implying that the Dark Presence predates mankind. Supporting this is the fact that the indigenous peoples in the area of Bright Falls referred to Cauldron Lake, believed to be the abode of the Dark Presence, as a doorway to the underworld.