"For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places" [Ephesians 6:12. Emphasis Added]
A demon is a supernatural being. The original Greek word may not have carried negative connotations but may have referred to a lesser deity or some kind of guiding spirit. However, in the New Testament's original Greek text daimōn was definitely an evil spirit. It is therefore no wonder that Jesus cast demons out of people over and over again.
But where did they come from? The book of Revelation paints a dramatic scene of a battle between good angels and the rebellious ones. The former army was led by Michael and the latter by Satan head of the demons according to Luke 11:18.
And there was war in heaven, Michael and his angels waging war with the dragon. The dragon and his angels waged war, and they were not strong enough, and there was no longer a place found for them in heaven. And the great dragon was thrown down, the serpent of old who is called the devil and Satan, who deceives the whole world; he was thrown down to the earth, and his angels were thrown down with him. (Revelation 12:7-9 NASB)
"If Satan also is divided against himself, how will his kingdom stand? For you say that I cast out demons by Beelzebul. (Luke 11:18 NASB)
These evil spirits are masters of deception and already condemned, they seem determined to take as many people with them as possible.
When it comes to choosing a cell phone or insurance policy most people will, more often than not, double check the advertising hype and what they are being told. Yet, they fall down drastically when it comes to spiritual matters. They never seem to stop to even consider the possibility that these beings are lying in their teeth. Everything that a mysterious voice, enigmatic stranger says is taken at face value, put into a book and launched on a spiritually illiterate works.
For example Alice Bailey, under the guidance of an ectoplasmic apparition from hell, who called himself Djwhal Khul ("The Tibetan"), wrote some 24 books and founded the Lucis Trust (formerly Lucifer Publishing Co.) which enjoys "Consultative Status" with the United Nations and has not only spawned several other organization… the Arcane School, Triangles, World Goodwill, Lucis Publishing, Lucis Productions, Lucis Trust Libraries, the New Group of World Servers, but also maintain the UN meditation room. And the purpose of these groups? At their core ALL these groups exist for one purpose ... in their words “the helping of the Great Ones and the rendering to Them of that intelligent assistance which will make their plans for humanity materialize”. A plan that is centered around making conditions suitable (By occult meditation and reciting of the Great Invocation) for what they call “The Reappearance of The Christ. Except that this Christ has nothing to do with Jesus Christ of the Bible. [Read Article]
Demons are not the spirits of dead men, or of some pre-Adamite race, as some argue, for the spirits of the human dead are not free to roam but are confined and under punishment (Luke 16:19-31; 2 Pet. 2:9). Nor are demons merely personifications of evil, or of natural forces, such as the "gods" of nature, as skeptics assume. Nor are demons the superstitious designation for particular natural diseases, such as epilepsy or mental illness, because Scripture clearly distinguishes these disorders from demon possession, although it is possible that both can be present or that demon possession could induce mental illness. 
Demons are fallen angels who are now irredeemably corrupted. Demons are set in their ways and have no opportunity for redemption. Thus they will eventually be cast forever into the lake of fire (Revelation 20:2-3, 7-10). This may explain why they responded to Jesus with fear and derision. For example, "What do I have to do with you Jesus, Son of the most high God?" (Mark 5:7; cf., Luke 4:41). And, "Have you come to torment us before our time?" (Matthew 8:29).
These evil angels are morally corrupted spirits who are in rebellion against God (Psalm 106:37; Matthew 12:34; Mark 1:36; John 8:44; 2 Pet. 2:4; James 2:19; Jude 1:6). Their rebellion was led by Satan (Jude 6; 1 John 3:8; Matthew 12:24-25; 25:41; Ezekiel 28:12-17) and resulted in their fall and expulsion from heaven (Luke 10:18, Revelation 12:7-9). As a result they became destructive, self-centered creatures who seek to thwart the purposes of God and Christ (Deuteronomy 32:17; Psalm 106:37; Revelation 2:10; 1 Pet. 5:8; Ephesians 6:11; Matthew 13:39; Luke 22:31; 1 Thessalonians 2:18; 1 Tim. 4:1; Mark 3:11; 4:15).
One of the demons’ principal ploys is to deceive people through false religion or deceptive miracles and thereby blind people to spiritual truth (2 Corinthians 4:4; Acts 26:18; 2 Corinthians 11:14; 2 Thessalonians 2:9, 10; Revelation 16:14; 20:10).
However, it must never be forgotten that Satan and demons are only creatures who are ultimately constrained by the sovereign power and purpose of God. When needed, the Christian has power over them (1 John 4:4; James 4:7) because Christ Himself was victorious over Satan at the Cross (Heb. 2:14; Col. 2:15; John 12:31). Jesus proved His complete power over demons (Matthew 12:28; Mark 1:34), often casting demons out of people (Matthew 8:31; 15:22-28), and He commanded His disciples to do the same (Mark 6:13; Matthew 10:1; Luke 10:17).
Using the Bible to catalog the powers and abilities of angels in general would give us a glimpse into their capacities, which would also help us discern the abilities of demons as corrupted angels. The following list indicates the capacities or methods of fallen angels in general. Some listings refer to the good angels to indicate that fallen angels would probably also have these abilities.
1. Power to torment. (Revelation 9:1-11; Luke 8:27-31)
2. Immense power; four angels are released to kill one-third of mankind. (Revelation 9:14-15)
3. Considerable influence; the world is said to be greatly affected by Satan’s power. (2 Corinthians 4:4; 1 John 5:19; in Matthew 4 Jesus did not question Satan’s right to grant Him the worlds’ kingdoms)
4. Purposeful deception. (Genesis 3:1-5,13)
5. Disguised as good spirits. (2 Corinthians 11:14-15)
6. A particular number of rebellious angels now confined (2 Pet. 2:4-5, Jude 6-7), the result of apparent sexual involvement and cohabitation (the exact term "Sons of God," bene elohim is only used of angels. C. Fred Dickason, Angels: Elect and Evil (Chicago: Moody Press, 1975), pp. 222-25; Ben Adam, Astrology: The Ancient Conspiracy (Bethany, 1963), pp. 90-112; Genesis 6:1-4)
7. Producing insanity; great physical strength. (Luke 8:26-35)
8. Inducing sickness for 18 years; producing suffering and deformities. (Luke 13:10-17)
9. Power over nature: Satan produces whirlwinds, fire from heaven and great miracles in the presence of people. (Job 1:16-18; Revelation 13:13; Heb. 1:7, Psalm 104:4)
10. Power over the human body: Satan produces painful boils or welts. (Job 2:7)
11. Dumbness, blindness, epilepsy, attempted murder. (Genesis 19:11; Matthew 9:32-35; 12:22; 17:15,18)
12. Multiple possession; apparently seeking "rest" by possessing humans. (Luke 8:30; 11:24-26; Matthew 12:43-45)
13. Convulsions, child possession, mauling. (Luke 9:38-39)
14. Animal possession. (Matthew 8:30-32)
15. A limited prevision of the future; fortune-telling. (Acts 16:16). Despite this apparent ability, demons are not omniscient; any powers they may have are still subject to God’s controlling and intervening providence. (Isa. 44:25-26)
16. Anger, great strength and power. (2 Thess. 2:7; 2 Pet. 2:11; Acts 19:16)
17. Treacherous natures, scheme wickedly, attack humans. (Eph. 6:10-16; Judges 9:23)
18. Provide supernatural revelations. (Heb. 2:2; Acts 7:53; Gal. 3:19)
19. Animals may recognize them. (Numbers 22:23-27)
20. Ability to speak through an animal. (Genesis 3:1-5)
21. Supernatural power to travel. (Job 1:7)
22. Instantaneous projection of a false reality. (Matthew 4:8)
23. Apparent ability to remove thoughts, to implant thoughts and to manipulate the mind. (John 13:2; Matthew 13:19, 38-39)
24. Moral corruption, deception and murder. (John 8:44)
25. Possess humans. (Matthew 8:28; John 13:27)
26. Great wrath. (Revelation 12:12)
27. Ability to incite betrayal. (Luke 22:3-4)
28. Physical ailments. (2 Corinthians 12:7)
29. Deception; blinding minds. (2 Corinthians 4:4)
30. Deceive the nations. (Revelation 12:9; 20:7-8)
31. Invisibility, but an awareness of their presence. (Job 4:15)
32. Ability to terrorize. (1 Sam. 16:14-15)
33. Can assume human form. (Genesis 19:1-10; John 20:12; Acts 12:8-9; Heb. 13:2)
34. To a degree, they can duplicate God’s miracles, changing sticks to snakes, water to blood (control over matter and energy), control over animals. (Ex. 7:10-12, 20-22; 8:6-7; 2 Thess. 2:9)
35. Defilement through occult practices and human sacrifice. (Deuteronomy 18:9-13)
36. Transport human beings. (Matthew 24:31; Luke 16:22)
37. Limited ability over events and human actions. (1 Chron. 21:1; Dan. 10:13; 1 Thessalonians 2:18)
38. Destroying the flesh; power of death. (2 Sam. 24:15-17; 1 Corinthians 5:5; Hebrews 2:14; Acts 12:23)
39. Tempt with evil. (1 Corinthians 7:5)
40. Objects of pagan worship. (Deuteronomy 32:17; 1 Corinthians 10:20; Col. 2:18)
41. Child sacrifice and murder. (Psa. 106:37)
42. Oppression. (Acts 10:38)
43. Control humans for their own goals. (Revelation 2:10)
44. Pervert the ways of God. (Acts 13:10)
45. Fire and brimstone rained down upon a city (destruction of Sodom and Gomorrah). (Genesis 19:13,24)
46. Influence dream states. (Genesis 31:11)
47. Send pestilence, power to destroy a city. (2 Sam. 24:15-16)
48. Communicate by speech to humans. (1 Kings 13:18; Acts 23:9)
49. Materialize and dematerialize at will. (Luke 2:9,13,15)
50. Vast in number. (Hebrews. 12:22; Matthew 26:53)
51. Speak to men; control of vocal cords, paralysis and possession. (Luke 1:19-20)
52. Different languages. (1 Corinthians 13:1)
53. Preach a false gospel and deception about God. (1 Kings 22:19-23; Gal. 1:8; 1 Tim. 4:1; 1 John 4:1)
54. False visions and experiences. (Jeremiah. 23:16; Col. 2:18)
55. Miracles. (Revelation 16:14)
This partial listing indicates that demons have more power and influence than most people may realize. And the preceding list is surprisingly relevant for today, when almost everything in this "ancient" list is duplicated somewhere in the world of the cults and the occult. As we documented in detail in the Encyclopedia of New Age Beliefs, evil angels (demons) imitate good angels and express great concern for people’s welfare. They give false visions and revelations in dreams or through channeling, automatic writing and so on. They can possess people, perform various miracles, cause insanity or cause murder to be committed. They can produce various physical ailments, sicknesses or mental torments. They can predict the future (albeit in a limited capacity subject to God’s sovereignty), encourage occult practices, manipulate the human mind by impressing thoughts, ideas or images, and they can influence nature. They can even assume physical form at will, from human to child, animal to mythological creature. They seek our worship and to pervert God’s ways. In the end, however, they destroy people’s lives. 
1 See Matthew 4:24; Mark 1:32, 34; Luke 7:21; 9:1; Kurt Koch, Occult Bondage and Deliverance (Grand Rapids, MI: Kregel Publishers, 1970).
2 John Ankerberg, John Weldon, The Coming Darkness: Confronting Occult Deception (Eugene, OR: Harvest House, 1993).