In Shiverburn Galaxy and part of the Grandmaster Galaxy in Super Mario Galaxy 2, several shadowy figures with hollow eyes can be seen standing on a cliff in the background.
As the figures belong to the galaxy's sky model, they cannot be reached in-game, even by using flight or moon jump hacks. For the same reason, they give the illusion of continually following Mario or Luigi as they travel through the galaxy. The figures appear to be modeled at dozens of times Mario's size, as can be seen in a model viewer, although it should be noted that the size of background objects in games must often be fudged for visibility.
The texture, internally named HellValleySkyTree, depicts two unique figures. It is used twice in the sky model with filename BeyondHellValleySky, referring to the internal name for Shiverburn Galaxy, "BeyondHellValley". This means that four figures are present, although one is normally obscured by the cliff geometry.
According to a Know Your Meme article, a creepypasta based on the figures seems to have played a role in their online traction. However, this article may have misidentified the presence of the figures, which exist in the official game, as a creepypasta, a term which refers to a horror story posted on the Internet.
The explicit allusion to Hell in the name "Hell Valley" has caught many people off-guard. According to Gaming Myths Wiki, the filename "immediately raises some questions".
The word "Hell" may describe the fiery setting associated with certain depictions of Hell, rather than imply that Mario has literally entered the underworld. The intent seems similar to the English jargon "Coin Heaven", where the word "Heaven" implies a good place in the sky, rather than literally referring to a holy afterlife. In any case, the word "Hell" is not necessarily literal.
Nintendo's use of "Hell" for lava level names is not without precedent, either. In the Japanese localization for Super Mario Galaxy, Melty Molten Galaxy used a transliteration of Hell Prominence Galaxy as its name. This was bowdlerized to Infernal [noun] Galaxy in several other languages. This adjective choice is tamer but carries a similar connotation.
In the case of "Beyond Hell Valley", however, the reference to Hell is only part of a working name used in the game's code. Shiverburn Galaxy is called Frozen Lava Galaxy (かちこち溶岩ギャラクシー Kachikochi Yōgan Gyarakushī) in the final Japanese release, and the name does not refer to Hell in any localization.
Taking all of this into consideration, it is reasonable to conclude that the figures standing on "Hell Valley" are not literally meant to be demonic. Rather, their filenames probably refer to the setting in which they can be found. Of course, out of context, the internal name "HellValleySkyTree" only amplifies the malicious feeling of being watched by eyeless shadow-figures and has led to rumors circulating that Shiverburn Galaxy was originally meant to take place in Hell.
The word "Valley" alludes to the giant valley used in the galaxy's sky model. Since it encompasses Shiverburn Galaxy, the course itself is "Beyond Hell Valley". As for the word "Sky", it probably alludes to the location of the relevant textures in the galaxy's sky model, which is the 3D technical equivalent of a background.
The most confounding piece is the word "Tree". Many have speculated that this refers to the figures being placed like trees would be, being meant to look like trees from a distance, or actually being strange-looking trees.
Like "Sky", "Tree" may alternatively be related to a technical detail in the game's file structure. Therefore, searching for other files with the -Tree suffix may provide clues as to the context of the word.
To our knowledge, Nintendo has never publicly discussed these figures. However, easter eggs in later games may appear to reference them.
Super Mario 3D Land
The next core series 3D Super Mario game after Super Mario Galaxy 2, Super Mario 3D Land includes an easter egg where at the end of many Ghost House levels, most notably World 4-4, waiting for 30 seconds in the area with the Goal Pole causes a similar-looking ghostly figure to appear in the background before opening its mouth and vanishing.
Super Mario 3D World
There are claims that the figures reappear in the reflection of a Clear Pipe Cannon in The Great Tower of Bowser Land in Super Mario 3D World.
On July 27, 2015, Imgur user UTGanon posted an album with various screenshots of the specific Clear Pipe Cannon in question. The album claims that its reflection map resembles Shiverburn Galaxy, and contrasts it with a different Clear Pipe Cannon reflection in Sprawling Savanna. However, the album also locates a volcano in the level that may have been used in the reflection map, which could be taken as an admission of possible apophenia.
Since Wii U asset ripping is possible, the assets used to create the reflection may be accessible, and further research would be helpful.
As mentioned, many people have used the texture filename alone to guess that the figures are meant to be demons or trees in one way or another.
Based on the figures' appearance, fans have also guessed at relations to Shroobs from Mario & Luigi: Partners in Time; the unused model "elh" from Luigi's Mansion; or to the Four Giants from The Legend of Zelda: Majora's Mask.
Though each of these appears to be a stretch, the Partners in Time reference is more possible than it outwardly seems, since the Ice Flower debuted in that game before returning in Super Mario Galaxy. However, neither figure closely resembles the Shroobs; this theory most likely arises from the fact that both seem to be creepy aliens with simple-looking eyes.
YouTube channel Geek Remix posted a video titled "Theory: Hell Valley Sky Trees SOLVED!", which speculates that the name "Hell Valley" is a reference to Jigokudani (地獄谷), a Japanese national park known for its geothermic hot springs that can be used in the winter. The name of this park literally translates to Hell's Valley.
Based on this, the video draws the conclusions that the figures are either meant to be Japanese macaques, or more likely, harmless tree spirits known as kodama (木魅). Much of this theory seems likely, as Nintendo has referenced Japanese culture and folklore throughout its games.
The Super Mario Wiki article on Shiverburn Galaxy also supports the comparisons to Jigokudani and kodama.
If this is taken to be the figures' true inspiration, then the term "HellValleySkyTree" refers to tree spirits in the sky model of a level based on Jigokudani.