Kathy Newman was a 3000 year old Mok'tagar demon who disguised herself as a human so that she could attend UC Sunnydale.
Buffy and Kathy shared a room at the beginning of freshman year, and quickly grew annoyed by each other. Kathy was an obnoxiously chipper, Madonna, Whitney Houston and Céline Dion fan who would play the Cher song Believe over and over again. She was especially difficult about Buffy's phone usage. Buffy's dislike toward Kathy eventually grew into a psychosis, causing Buffy to become convinced that Kathy was a demon and take extreme measures such as stealing her toenails so that they could be inspected for anything suspicious.
It ultimately transpired that Kathy actually was a demon, and that Buffy's insanity was a side-effect of having her soul gradually stolen over several nights. Kathy was doing so because her parents were coming to force her to return to her dimension and she believed that they would take whichever girl in the room didn't have a soul.
Thanks to the efforts of Rupert Giles and Willow Rosenberg, however, the portions of Buffy's soul which Kathy had earlier stolen were restored while the two were in the middle of a fight. Immediately after the transfer was completed, Kathy's father arrived and forcibly took Kathy back with him.
With Kathy's departure, Willow, having been experiencing her own roommate problems, moved in with Buffy.
Kathy was a rather strange individual who was obsessive compulsive. Her unusual activities included measuring pencils after sharpening them to make sure that they were the same length and labeling all of her food with her name. It is possible that she adopted these behaviors to seem as human as possible. She had a constantly cheerful attitude, using phrases like "super" and "what the blizzard". Also, according to Parker Abrams, she was a closet hockey fan.