He is from Austrian folklore, though I think he is also from Southern Germany/Bavaria. He is Santa's helper that punishes that bad kids. What does he do? Well, when St. Nikolaus comes, Krampus comes to punish the bad kids by beating them, stuffing them in a sack, and taking them away. I think that is totally frightening for children - abandonment and losing your family.... forever.
Thank the Germans/Austrians for scaring kids into behaving.