Throughout the course of the Main Story, the Masked Lady maintains an air of mystery around her as she reveals little to none about herself. Yet, she treats the Little Girl coldly, claiming that the place was much more peaceful before she arrived and urging her to stop playing the piano with Deemo.
In the Leaves Memory, she is shown to have a strong disdain for the Little Girl growing the tree with Deemo as she crushes a leaf that has fallen from the tree.
In Deemo -Last Dream-, it is revealed that Deemo shares a stronger bond with her than with the Little Girl.
In the You Cannot Go Memory, she actively struggles with the Little Girl to prevent her from opening the door to the Top Floor, the final room, before being coaxed to desist by Deemo.
In the Goodbye Memory, as the Little Girl, an aspect of Alice, comes to the realisation that Deemo was her late brother Hans, the Masked Lady removes her mask to reveal her true identity: another aspect of Alice's personality who was unwilling to accept and live with the truth, instead attempting to thwart the Little Girl's efforts in discovering said truth.
At this point, in Last Dream, Alice realises, "And... the Masked Lady... is the me who couldn’t wake up from the dream———"
The After Story of Deemo: The Last Recital provides a deeper insight into the origins of the Masked Lady. It is revealed that the she too, like the Little Girl, had woken up with amnesia. However, the space she woke up in was a realistic construct of her home unlike the dreamlike space of the Little Girl, and Deemo was absent. After playing enough songs on the piano, she obtained the white cloak and enough masks pieces to construct it. An embellishment on the white cloak reveals her name to be Celia, an anagram of Alice. While constructing the mask, she regained her memories and after completing it, was presented with two choices: to wear or to destroy it. Wearing the mask results in Celia as she appears in the Main Story as it signifies her wilful ignorance of the truth. Destroying the mask (alternate ending) causes her to wake up on her hospital bed as Alice instead of the Little Girl aspect; a twist to the original ending.
In Forgotten Hourglass playthroughs, Celia no longer treats the Little Girl coldly. Her dialogue options change from her speech to her very thoughts themselves. There is a room strongly linked to her, the Mask Room, which seems to be her personal room. It is implied that in the time between successive playthroughs, she has been residing there the entire time awaiting the Little Girl's return.
With 100% Staircase Height in playthrough 2 and 3, she and the Little Girl can be seen conversing directly in the Mask Room and in playthrough 4, they can be found in the Mask Room reconciling, with the Little Girl apologising for causing Celia to suffer in silence.
Celia wears a white cloak that has a droopy end at the tip of her hood. Her white theme likens her semblance to a ghost, which is made more apparent as she can float or hover to some degree (can be seen in the Attic) and turn translucent. Her mask is a plain white one that has eye holes, a mouth hole and a slender nose protrusion.
In the Leaves Memory and the cover art of Reverence (Deemo ver), there seems to be a pocket watch hanging around her neck out from her cloak.
It is shown in the After Story that Celia is the first to exist in the dream world, before the Little Girl and even Deemo. Her dialogue in Forgotten Hourglass playthroughs support this, as she claims to know about the world best.
Through Celia's conversations with the Little Girl in the Mask Room, they admit to have hoped for the courage to speak up more and to understand each other better. They also hope to one day accept each other as a single person instead of forgetting about the other.