Phantom emerged from the Final Keyhole after it was opened by the Princesses of Heart, and went straight to Neverland, where it possessed the Clock Tower. Tinker Bell discovered it there, and flew back to the Cabin of Captain Hook's ship, where Sora, his friends, and Peter Pan found her. She led them back to the Clock Tower, where they were attacked by Phantom. However, after a violent battle it was defeated.
The Phantom wears a long, tattered, black cloak with long sleeves that gradates into a light aqua color from the waist down. It has a long, pointed hood and it doesn’t seem to have a face or body of any kind. Only its clawed, five-fingered hands are visible, but even they seem to be wrapped in the cloak.
The apparent source of its power is an orb that contains its heart in the lower section of the cloak. This orb glows in a different color—red, blue, yellow, and white—depending on the type of attack it is currently vulnerable to. The orb can also disappear entirely for short periods of time. The Heartless emblem is displayed on its back.
In Kingdom Hearts Final Mix, the Phantom is largely unchanged, though its cloak is now predominantly white with black sleeves decorated by a flame-like pattern.
The Phantom is physically similar to the description of Lord Ombra (minus the heart orb) from the book Peter and the Shadow Thieves, a continuation of the Peter Pan mythos published by Disney. Lord Ombra is also a character clad in a dark cloak with seemingly nothing under it.
The Phantom's name is a clear reference to its eerie, ghost-like appearance.