WARNING: This article contains spoilers from Stranger Things 2
Our favorite Hawkins residents may have won the battle against the Demogorgon in season one, but in Stranger Things 2 the war has only just begun against the Shadow Monster. The big bad of season two has far more overarching power over the Upside Down and has been steadily expanding his reach into the human world ever since Hopper and Joyce rescued Will far from the alternate dimension, but the question is: what actually is he?
The Shadow Monster is a gigantic interdimensional entity that looks like a cross between a Xenomorph and a spider. He appears to be the architect of the Upside Down's ecosystem, or at least has power over it as every living thing that exists in the alternate dimension is connected to him. From the tendril-like vines that have been steadily growing outwards underneath the town of Hawkins from the gate to the demo-dogs that have evolved from slug-like creatures to ferocious wolf-like beasts, they are all under the command of the Shadow Monster.
The entity takes a particular interest in Will, who is still suffering from his prolonged experience in the Upside Down. At first, he believes that the harrowing images of the Upside Down that he keeps randomly seeing are flashbacks, as does Dr. Owens (or at least so he says) who has taken over Hawkins Lab from Dr. Brenner. But it soon becomes clear that what Will is witnessing is the Upside Down in the now and the Shadow Monster wants him. The kids believe that Will is able to see into the other dimension because somehow acquired "true sight" while he was down there, which Dustin explains is having the "power to see into the ethereal plain."
Because Will doesn't have control of this ability, he keeps on dipping into the Upside Down, which the Shadow Monster is obviously aware of (and possibly manipulating), so he wants to use that connection to spread his power into the human world. The Shadow Monster gets the opportunity to in the opening of 'Chapter 4: Will the Wise' when he sends his dust-particle like essence into the kid's body. Like a virus, he spreads through Will's bloodstream making him a part of his hive mind. It seems that every single thing from the Upside Down is infected with the Shadow Monster's essence, thus allowing him to communicate and control them. It also means that when one of them feels pain they all feel pain. That's why Will collapses when the soldiers try to burn down the vines in the tunnels under Hawkins after they rescue Hopper in 'Chapter 5: Dig Dug.'
The Shadow Monster does not like heat or hot places, hence the foggy and cold climate of the Upside Down, which means every one of the organisms connected to him does not like heat either. The Pollywog shies away from the heat lamp when Dustin puts it in his turtle tank and Will, after being infected, needs the windows and doors open to keep cool despite the winter temperatures.
The connection between Will and the Shadow Monster is slightly reminiscent of that between Harry Potter and Lord Voldemort. Because of the Horcrux in Harry he is able to see through Voldemort's eyes and vice versa, which often led to the Dark Lord manipulating the young wizard. The Shadow Monster is doing the same with Will by getting him to work as an involuntary spy and setting up a trap for the soldiers in the tunnels. He's also is able to use the connection to know their exact location, so Joyce and Hopper are forced to hide Will in a place he doesn't know and fill the room with space heaters in order to draw the virus out of the child.
The best analogy to explain what the Shadow Monster is once again provided by the kids and their love for Dungeons & Dragons. Dustin compares him to the Mind Flayer, a monster from an unknown dimension with the ability to enslave different races with his psionic powers. Will is able to communicate with the rest of the gang without alerting the Shadow Monster by tapping out a secret message in Morse code, "close gate," which Eleven is able to interpret perfectly - they need to break the Shadow Monster's hive mind link by closing the gate to his dimension.
With Eleven back from her trip to Chicago to find "The Lost Sister," they are able to use her telekinetic powers to close the gate which she had opened before the events of season one. The minute it is closed, the demo-dogs die immediately as do the vines and membranes that were spreading underneath Hawkins. Thankfully, they managed to get the Shadow Monster particles out of Will before the gate closed so he survived the ordeal. Sadly for him and the rest of Hawkins, the Shadow Monster also survived and is still lurking over (under?) the town in the Upside Down.
Just why the dimensional entity has his sights set on the human world is still uncertain. He may just be a parasite that has travelled across dimensions, leaving a trail of destruction and infection in his way. He could, like the Mind Flayer, believing that he is a superior race and wants to dominate every dimension possible. There's still a lot of mystery surrounding the creature, and his motivations, which is obviously what the Duffer Brothers intended so they could offer fresh storylines into further seasons of Stranger Things. We certainly can't wait to see them.