Sheogorath is the Daedric prince of madness, one of the incarnations of "Jyggalag", the daedric Prince of Order.
He is utterly unpredictable, and may hinder or help any mortal unlucky enough to cross his path. The Dragonborn meets him during the quest The Mind of Madness. According to established lore, he lives in the Shivering Isles in Oblivion.
Once at the end of every era, Sheogorath can revert to his true form (Jyggalag) and retake the Shivering Isles in what is known as the Greymarch. Once done, he reverts to his mad form.