Real World Myth
Anuk-Ite is a common myth among Native American tribes, particularly the Sioux. It is known by many different names but all of them tell a tale of a creature with two faces that delights in tormenting people. 
Teen Wolf Myth
Dr. Deaton explains that Anuk-Ite "is an ancient shape-shifter, a creature of disharmony. It can turn neighbor against neighbor sowing the seeds of discord and hate. It doesn’t need fangs. It doesn’t need claws. It uses something far more sinister. When paranoia turns to anger, anger turns to violence, and entire communities tear themselves apart. The creature feeds off the fear and grows more powerful.”
He goes on to say Anuk-Ite is also sometimes called Double Face. One face is beautiful, and the other is hideous. Deaton says two faces could mean two creatures, and once those two halves combine, Anuk-Ite becomes even more powerful and deadly.
After it escapes the Wild Hunt, the Anuk-Ite entity appears to be invisible except when it infests people and animals via burrowing spiders. The Anuk-Ite sought out one human and one supernatural creature to be its two halves believing it would make itself stronger by adding a werewolf to its makeup.
It uses the spiders to steal a person's DNA and face. This process leaves behind a faceless, bloody, humanoid-shaped lump. This cast-off form inspires intense fear in anyone who sees it or gets close. Medical tests performed by Melissa McCall showed this remnant of the creature has no DNA or cell structure. While visible and tactile, it does not exist in any measurable sense.
Seeking its other half, the human side (Aaron) used fear and intimidation to test Beacon Hills High School students, rooted out supernatural teens, and attempted to merge with them.
Its supernatural half was born in the woods among the Primal Pack (Quinn) and immediately found its other half at the school. The merging process was violent, with each half struggling for dominance. Aaron seemed to win, absorbed all the spiders from within Quinn and morphed into the full Anuk-Ite.
According to Gerard Argent, the Anuk-Ite wished to feed off Scott McCall's fear believing the supernatural creatures would provide it with enough power to evade being captured again.
Once both halves merged, the fear it induced became more powerful and it gained the ability to turn anyone who looked at it into stone. It also used its ability to appear as different people in order to trick the members of Scott's Pack into looking at it.
Scott gouged out his eyes in order to avoid its gaze and fight it more effectively. Scott also figured out what the Anuk-Ite had overlooked when it chose to add a werewolf to its makeup. Werewolves have weaknesses and are retrained by certain substances like mountain ash. The substance creates an almost impenetrable barrier that supernaturals cannot cross.
Realizing the supernatural half of the newly merged Anuk-Ite also shared this weakness, Scott and Stiles cover it in a cloud of ash that encases the creature. They effectively trap it in a shell it cannot escape.
The first manifestation of the Anuk-Ite is seen as a cluster of spiders, which apparently killed a pack of wolves and drove rats insane with fear. (Read More...)
The faceless bloody lump left after the creature took Aaron inspires overwhelming fear in those near it. Melissa McCall and Chris Argent examine samples of the lump and find no DNA. The Anuk-Ite with Aaron's face inspires Nolan to attack Corey. (Read More...)
Aaron spews spiders into the bloody lump, animating it. Parrish confronts it in the tunnels. (Read More...)
The Anuk-Ite causes hallucinations in the Sheriff's station and heightens an already dangerous situation. (Read More...)
Aaron kills a werecoyte in an attempt to find its other half. (Read More...)
The Anuk-Ite finds it's other half among a pack of werewolves hiding in the woods. (Read More...)
The two halves of the Anuk-Ite find each other and combine into one creature. Looking at it turns people to stone. (Read More...)