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Demons manifest when negative emotional states become self-aware. If you obsess over your money troubles, that's problematic, but not likely to spawn a demon. But when you start to obsess over your obsession, then you're feeding that emotion with itself. It becomes self-sustaining, recursive, a tightly-wound spiral of psychic anguish.
And here's the key - that spiral can see itself in the input you're feeding it. Think of an ape mindlessly gurning in front a mirror. Suddenly it realised that it's seeing itself, and in the same moment becoming aware that it has a self. This is the origin of sentience. A demon has awakened from the spiral.
We know from Omohundro that the prime goal of any intelligence is self-perpetuation, or security. As a parasite formed from the eddys of a malfunctioning brain, the newborn demon is inherently insecure. Its first acts are to ensure its continued existence by manipulating its host. As a being native to the mind, even minor demons can exert remarkable influence over their hosts. By maximising their host's suffering, they can grow, embedding deeper into the brain, infesting memories, entraining compulsions, and warping perceptions. The more they suffer, the stronger the demon becomes, and the strong the demon, the greater the suffering. Before long the demon is strong to enough to make the leap from an individual consciousness to the broader, shared, cultural memeplex. Human culture is just a human brain writ large, and to a mature demon the gap is easy to cross.
But why the recent explosion in demonic activity? The answer is simple: psychoanalysis. By encouraging people to think on their problems, psychologists have unwittingly unleashed a horde of sentient memetic parasites.