Skull Kid is a unique antagonist in The Legend of Zelda series, as he isn't a malevolent evil like other villains such as Ganondorf. It's revealed in Majora's Mask that Skull Kid, tempted by its power, donned the Mask and was unwittingly used as a puppet for Majora's true goal - manipulating Skull Kid's emotions to its advantage.
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Despite playing such a big role as the villain of this game, Skull Kid's true nature is more childish, as he plays pranks on the people of Termina and is generally known for his mischief. Skull Kid also has a more tragic side to his story, as he was abandoned by his friends.
First appearing in Ocarina of Time, the Skull Kids are first found within the Lost Woods and then in the Sacred Grove of Twilight Princess. It's stated in Ocarina of Time that Skull Kids are children who became lost in the forest and were transformed into this imp-like form.
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The Skull Kid from Majora's Mask is just one of these Skull Kids, who was once likely a young Hyrulean child who wandered into the forest and never returned home.
Prior to the events of Majora's Mask, Skull Kid most likely found his way to Termina in the same way Link did. Here, Skull Kid met and befriended the Four Giants, who ultimately had to leave him behind to fulfill their duty as guardians of Termina.
Saddened by the loss of his friends, Skull Kid took out his grief on the people of Termina, resulting in them calling on the Four Giants to stop him. The Four Giants then banished Skull Kid from the land of Termina for his actions, threatening to kill him if he ever returned.
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