The Nightmare is inspired by Freddy Krueger, the antagonist of the movie series A Nightmare on Elm Street.
From 1975-1977, Freddy Krueger kidnapped and murdered 23 children in his hometown of Springwood, Ohio. Inhabitants of the town set his house ablaze, essentially killing Krueger's physical body -- he continued to exist, however, in the dreams of children.
His ability will bring all nearby survivors into the dream realm; a dark and gloomy house with red windows for 20 seconds, with no exit. If The Nightmare fails to kill all the survivors in those 20 seconds, they will return to the physical world.