Demons are evil and malign creatures from the infernal regions. They are the essence of spirit and mana capable of assuming material form. Perhaps the most rightly feared of all the 'supernatural' creatures, demons are certainly among the most powerful. Only the gods and their avatars are stronger, and even then, rumors persist that the greatest of the Demon Princes are as strong as the lesser gods.
Fundamentally demons are beings of spirit which are given physical forms on the planes of men. Their horrendous and hideous forms are manifestations of their own maleficious thoughts and desires as well perhaps as the beliefs and perceptions of those who conjure them. Certainly in their primal state they appear to have no intrinsic material form or appearance save that of a glowing blobs of colored light/energy on the Astral Plane.
When first summoned to the planes of men by wizards they assume physical forms dictated by their desire to frighten and intimidate mortal men. Once this form is established, it generally remains fixed and constant. Staying the same each time that particular demon is summoned to the planes of men. Only the most powerful of demons are capable of changing their physical appearance, and even then do so rarely and always to some even more terrifying form (despite the annoying rumors to the contrary by a few paranoid and delusional wizards). When not serving mortal men, demons reside in an infernal plane called the Abyss, where the cavort and plan the destruction and overthrow of all mankind. A few mortals have been sent (against their will) to the Abyss, most have perished in the unlivable conditions there, but the few who have not and returned, report that it is a place of soaring heights, huge mountains, towering pillars and balls of flame that burst spontaneously in random locations. They also say that the temperature is well over the boiling point of water. The river Styx passes through the center of the Abyss.
Occasionally, for one reason or another a demon will mate with a humanoid (human/elf/dwarf/halfling/etc). Usually the demon doing the mating is either an Incubi or a Succubi. In general such matings are not fertile. Occasionally they will be. If this is the case then the offspring should be treated essentially as any other half breed offspring. Except for a few things. The first is that if people know, then usually the mother and child will be anathema to all normal society. Or later on the child itself may be if discovered later. This is especially the case if the child starts manifesting demonic features.
Usually the child looks fairly normal until puberty (although not always) at which time, whatever, if any, demonic features will begin to surface (as if puberty weren't bad enough for normal children). The Half-Demon Offspring Table gives a rough idea of what one might expect from such a mating.
One important thing to note is that no offspring who was a full demon of the higher classes would start with abilities. Rather they would probably grow to these abilities with time and age.