The Grim Reaper is an Egyptian scythe-wielding, skull-headed statue that is the guardian of the 8th Makluan Ring with it's temple located somewhere in Egypt.
Mandarin had a hard time trying to solve the riddle that states "Who would master the future must endure the pain of the past" as the ring is in the mouth of the Grim Reaper statue. Tony uses his will to overcome the Grim Reaper statue when Gene demands the ring. The Grim Reaper statue attacks Mandarin and then sneak attacks Iron Man before returning to it's statue state withdrawing the ring it guarded as a giant dust storm plans to bury the temple. The Grim Reaper's attack sends Tony and Mandarin into a dream state where Tony relives the day of his father's presumed death followed by Obadiah Stane mass-producing his armors while Gene ends up in a dream-like state revolving around Zhang. Pepper ends up getting through to Tony and turns the tables against the dream Obadiah Stane as the Grim Reaper states that Tony "had endured". Iron Man wakes up Mandarin as the Grim Reaper statue fights for keeps. Iron Man and Mandarin had to work together to defeat the Grim Reaper statue which they do.
When he is in specter mode, he is intangible to any attacks and can disappear and reappear. When it strikes someone with its scythe, instead of cutting, it puts the opponent in a frozen, unconscious state where he is forced to relive his worst memories until that person endures them.
When the test is passed, it becomes a living statue. When it's in this mode, it is a dangerous enemy that can hold its own against Iron Man and Mandarin individually. It's highly durable and its scythe does real damage this time.