The Nightmare Skulls or Skulls are a tribal race of nightmarish creatures that were born out of the elven king Oberon's nightmares, his inner demons that plagued his darkest nightmares that became real to turn the tide of the war with the dwarves, but at horrible price. The Skulls are not just an illusion but they are not real either, they are considering a type of undead creature, as they are exist physically but are not alive as you or me.
When Oberon came back to his home after defeating the Second Overlord, he fell into a deep sleep after the Wizard convinced him that a hero needs rest. When the Dwarves invaded Evernight Forest he would not awaken, he was aware what is happing but could not wake up, so the forest merged Oberon with the oldest tree of the forest to protect itself and his people.
That when the 'Dreaming' started, the mystical tree caused Oberon dreams to come to life, and from his deepest nightmares, Oberon gave birth to the Skulls, his most inner demons that plagued his dreams became manifestations of the mind made flesh. The Skulls fought off the dwarven invaders, but as soon as the dwarves where driven back to their domain the Skulls turned on the elves and killed all remaining elves who survived the dwarven invasion.
Oberon's nightmares plagued Evernight and slowly started to corrupt the once peaceful forest. With every passing day the forest became more and more corrupted, becoming the darker and twisted version of Oberon's nightmares. Any wildlife that lives in the forest that came in tough with the corruption became the infected turning from friendly and peaceful animals into violent and aggressive beasts, the once small toads grow into hulking brutes with taste for something else than bugs. The corruption even infected the purest of all of Evernight Forest's creatures, the Unicorns, turning them into vicious beasts with a taste for flesh and blood.
Many of those who entered the forest to find out what happened to the elves never returned; the Skulls killed them and used their skulls and bones to construct many altars, totem poles and other horrifying decorations throughout the forest, while performing unholy rituals to worship their "Father", but they only increasing the corruption of Evernight.
After the Third Overlord finally killed Oberon, ending the ‘Dreaming’ and all the Skulls faded away like the bad dreams they are. However, it will take many years before all damage that Oberon’s nightmares have done to Evernight Forest is healed. There are rumours say that few Skulls have become truly living beings and survived the death of their "Father", hiding in the shadows waiting until it is their time to strike back.