Demon is what people use to refer to those beings that are basically an embodiment of every evil and negative emotion, thought or act in the world. A demon doesn't have a specific form, it can be an animal or a person. Even if it's an entity of primary evil it doesn't have to look evil, in fact it probably looks the opposite in order to lure and trap good people.

That's the theory, at least. In reality in a place like this, "demon" is nothing but another race basically. Being evil or not doesn't matter here for that.