Sephiroth (セフィロス Sefirosu) is the manifestation of Cloud's darkness. He is voiced by Lance Bass in Kingdom Hearts. Toshiyuki Morikawa voices Sephiroth in the Japanese version of Kingdom Hearts II, and by George Newbern in the English version. He is the most powerful of all villains in the Kingdom Hearts series (though he doesn't make much of an effort to control the Kingdom Hearts universe, concerned mainly with Cloud), and Sora has to be at a pretty high level to even survive Sephiroth's attacks.
First meeting
Sephiroth serves as the "Platinum Match" for Sora at Olympus Coliseum, a secret boss available in all but the regular Japanese version. After being defeated by Sora, Cloud finally meets Sephiroth. Sephiroth implores Cloud to turn to the Darkness, which Cloud refuses. The two engage in a high-speed battle in the air, the outcome of which is unknown.
Second meeting
Right before the invasion of Hollow Bastion, Cloud warns Sora and company about Sephiroth, and his ways of the darkness. Later, as Sora exits the castle to go help defend against the invasion, Sephiroth appears. He asks about Cloud's whereabouts, but Sora doesn't answer, though he and his friends reveal that Cloud realizes that Sephiroth is the manifestation of Cloud's darkness. Seeing that Cloud is becoming enlightened and desires to fight him, Sephiroth takes his leave.
During the battle, Cloud is surrounded by Heartless, but Sephiroth intervenes, defeating them all in one swipe. Cloud intends to defeat Sephiroth to escape the darkness, but Sephiroth only replies that Cloud will never be able to do so, and will always cower in the light. Cloud vehemently denies Sephiroth's claims, but Sephiroth is undeterred, and leaves just as Tifa arrives.
After the Master Control Program is defeated, Sora encounters Sephiroth at the Dark Depths. Sephiroth again asks about Cloud, but Sora and his companions don't reveal anything. Sephiroth then inquires about Sora, Donald, and Goofy's identities, but again, they refuse to answer. Sephiroth then notices Sora's Keyblade, and attacks, intending to defeat Sora so that the Keyblade might come to him. However, Sora appears to overcome Sephiroth, but Sephiroth justs seems to shrug off the battle (he appears unhurt, and not even tired, and claims that Cloud is the only that can "eliminate him").
Cloud arrives later, and a battle begins, with Sephiroth desiring to draw Cloud into the darkness. However, Tifa protects Cloud, saying that Cloud does have light in him, and that, even if he doesn't, then he just needs to be surrounded by light. Nevertheless, Sephiroth and Cloud start off for another battle, but disappear in a brilliant flash of light. Their location and status are unknown.
Background
Sephiroth, like Cloud, comes from Final Fantasy VII, in which he was previously a member of the Shin-Ra Corporation's army SOLDIER.
When Sephiroth realized the secrets of his past and the Jenova project, he was driven insane, erroneously believing himself to be the last of the Cetra (a neigh-extinct race of humans from FFVII) and that Jenova is his mother. Hating the "normal" human race for abandoning the Cetra, leaving them to defend the planet themselves against "the Calamity from the Skies" (who, unbeknowst to Sephiroth, is actually Jenova, the extra terrastrial, whose DNA had been infused into his own), he decides to rid the world of them by summoning another calamity, using the Black Materia, Meteor.
His physical body is destroyed by Cloud, but is for a later period resurrected through one of his remnants, Kadaj (from "Final Fantasy VII: Advent Children").
When Sephiroth appears in Kingdom Hearts, he is considerably less fiendish then his incarnation in Final Fantasy VII, and if his past in that version is ever explored there will most likely be changes to it (Septhiroth killed Aerith in Final Fantasy VII, and her death has become so infamous among fans that some don't even view it as spoiler anymore to many, but there's nothing to indicate that in Kingdom Hearts).
In Battle
In all incarnations, Sephiroth is portrayed as a master swordsman, wielding a long blade called the Masamune. In the Kingdom Hearts universe, Sephiroth has a large repertoire of techniques that reflects some of abilities he used in Final Fantasy VII. He can move about the battle ground with impressive speed, even fly, and can additionally teleport. He can also summon gigantic pillars of flames that can suck matter in, send out orbs of darkness, and even launch a wave of miniature meteors. His most noticeably technique is Heartless Angel, an attack that drains an opponent of all their life force and magic (though with the right ability, they can remain with 1 HP) if he is not interrupted in time. In Kingdom Hearts, Sephiroth is the hardest boss, followed by Kurt Zisa and Phantom, however, in Kingdom Hearts Final Mix, Xemnas (known at the time as the Unknown) replaces him as the hardest boss. In Kingdom Hearts II, he is the toughest boss again, the difficulty of which is rivaled only by the challenge of the Hades Paradox Cup. However, in Kingdom Hearts II Final Mix+, he has lost that great honor to the Organization XIII Data Rematches in the Cavern of Remembrance and the Terra/Enigmatic Soldier boss in the Hall of the Cornerstone, especially since the Limit Drive Form will still be accessible to Sora as it needs not fuse with any party member to be used.
It's interesting to note that Sephiroth is at first the hardest boss in Kingdom Hearts 2 because Xemnas is much weaker (gameplay wise) then he was when he first appeared.