I've become increasingly interested in her true identity as of late.
In Oblivion, she appears as a Ghostly Dunmer woman. In Morrowind, she appears as an Imperial woman who you have to kill in Ald Sotha.
In the book Fire and Darkness: The Brotherhoods of Death, the Night Mother is identified as the Daedra Lord Mephala. In another book entitled Sacred Witness, the Night Mother is identified as a former Thieves Guild member. In Morrowind, NPC Severa Magia is identified as "Night Mother".
So is the Night Mother an incarnation of Mephala herself? Or an agent similar to the Nerevarine who is repeatedly reincarnated?