In Sharon's dream world of Harry Barker, the grue is a mythological monster said to be "the omen of death" and "the specter of darkness". It is said to abhor light and devour all who tread aimlessly into its realm. Although no living hacker is known to have actually seen a grue, it is rumored to be large, hairy, and very smelly, covered in thick black hair and sporting razor-sharp teeth and claws.
During "Harry Barker and the Prisoner of Angband", Harry first saw the grue shortly before catching the Scuzzy Bus, although the bus pulled up between them and apparently frightened it away. Later Don saw the grue in Harry's data during Predictive Analytics class, which caused Professor Oracularity to react in horror. It was eventually revealed that the "grue" Harry and Don both saw was actually Harry's godfather, "Serious" Nick, using a virtual reality overlay to disguise himself. As a master of VR, Nick originally created the grue avatar when he attended Hollerith's and revived the disguise as a way of avoiding pursuers after he escaped Angband Prison.
The grue is the analog of the Grim from Harry Potter, which in turn was based on the mythical black ghost dog legends of the British isles. These legends also gave birth to Sir Arthur Conan Doyle's The Hound of the Baskervilles. The name "grue" is taken from the infamous Zork monster. (See also this Jargon File entry.)