Sheogorath is the Daedric prince of Madness, whose purposes are said to be unknowable. His realm is known as The Shivering Isles, the Madhouse, or the Asylums. The Golden Saints , or Aureals, and ,The Dark Seducers or Mazken, are his servants.
Sheogorath is one of the few Daedric Princes whose creation may be
linked to the change or destruction of an Aedra (some of the others
include Malacath and Meridia). Aldemeri creation stories attribute his creation to the removal of Lorkans "divine spark". By one of these myths, he is described as the "Sithis-shaped hole" of the world.

Sheogorath is (or was), in fact,Jyggalag, the Daedric Prince of Order. The story goes that Jyggalag had, in times beyond memory, grown in power so much that the other Daedric princes grew jealous and fearful. They
cursed Jyggalag to live as Sheogorath, the incarnation of the thing he
hated most. At the end of every Era, Jyggalag was allowed to take on his
true form once again, and reconquer his lands, an event known as the Greymarch.
After that, however, he would be transformed back into Sheogorath, and
Sheogorath would spread madness upon his lands once more. The Champion
of Cyrodiil reportedly ended the cycle by defeating Jyggalag during the Greymarch at the end of the Third Era .
This released Jyggalag from his curse, allowing him to remain in his
true form instead of transforming back into Sheogorath. After defeating
Jyggalag, the Champion of Cyrodiil supposedly became the new Sheogorath.
Sheogorath typically manifests on Nirn as a seemingly harmless, well-dressed male, much to the surprise of
many mortals. The reasoning behind his appearance is to lead
unsuspecting mortals down the path to insanity, or "the Golden Road".
Originally, Sheogorath was one of the Daedric Princes the Chimer, now Dunmer, revered in their ancient ancestral worship. However, when the Tribunal Temple became the dominating religion in Morrowind, Sheogorath, as well as Mehrunes Dagon , Malacath, and Molag Bal, became known as one of the "Four Corners of the House of Troubles". He was said to rebel against the Tribunal, and thus worship of Sheogorath became punishable by death. His role in Dunmeri culture is to test them for any psychological weakness and is associated with the fear other races have of the Dunmer.

It is written that when he rebelled against the Tribunal, Sheogorath tricked the moon Baar Dau, inspiring it to hurl itself at the city of Vivec. Sheogorath justified his actions by claiming Vivec was built in mockery of the heavens. Vivec
is then said to have frozen Baar Dau in its descent with one gesture;
the moon then swore itself to the Tribunal's service forever. After the Nerevarine destroyed the heart of Lorkhan ,
Vivec's power was greatly weakened, and Baar Dau continued its descent,
destroying Vivec City and resulting in the eruption of Red Mountain.
Sheogorath is one of the many prominent Daedric Princes in the culture of the Kahjiit people. In the Khajiit myth of creation, Sheogorath is called "Sheggorath". By the Khajiit, he is known as the Skooma Cat.
The worship of Sheogorath is widespread in Tamriel. But historically, Sheogorath has been especially revered in the provinces of Morrowind and Elsweyr, home of the Khajiit.
Sheogorath is one of the easiest Daedric Princes to summon. Although his official summoning date is Mad Pelagius day, the second of Sun's Dawn, Sheogorath can be summoned anytime there is a storm.
Sources:UESP