Normally appearing like a human with floating abilities when enraged and shifting to nightmare form signs show he is anything but human. The vapors indicate he shifts to his spectral form.

Kinbakushi was once a normal human died at his own hand because of the tragedies that made him lose hope in anything around. As slowly his heart stopped beating the pain attracted a demon who wanted to eat his spirit. He overcame it and absorbed the demon instead becoming a roaming nightmare. Litterally.