Demonic was the term for when an player character or non-player character was killed in game without deeds. After the conversion to GemStone IV, the ability to go Demonic was taken away from adventurers, but it still occurs with characters controlled by gamemasters.
When a character went demonic, the character and all their possessions were permanently destroyed.
Behind the Scenes
The idea of dissolving into Oblivion as associated with "the demonic" is likely an allusion to "Ex Oblivione" by H.P. Lovecraft. It features an "irrepassable" locked bronze gate in woods of twisted trees in the dreamlands with unknown wonders or horrors beyond it, and the narrator takes a special drug to explore it as his final journey. The final line can be interpreted as "lost to the demonic" meaning "lost forever to real life", as Oblivion is a "crystal" dream state of infinity from which "the daemon Life" has made one only briefly removed. The Gates of Oblivion associated the idea instead with the Void.
Gates of Oblivion
This is what being "lost to the demonic" usually looked like in Purgatory following a spirit death without deeds. Life force or levels was the original term for spirit. The messaging stating that your soul "is in danger of vanishing from the land forever" still exists, even though it is no longer possible to be lost to the demonic. However, the rest of it no longer happens, and mentioned nothing demonic.
The last of your life force is drained from you and you die! It seems you have died, my friend. Although you cannot do anything, you are keenly aware of what is going on around you... You realize that you have no outstanding favors which Lorminstra owes you, and without having accomplished a deed for Her, your soul is in danger of vanishing from the land forever! Slowly the world begins to dissolve into a grainy montage of color... [Purgatory] You find yourself wandering amidst endless streaming light, and vast nothingness. This place feels torn between two prophecies, each vying for your loyalty. Also in the room: All the spirits of those who could not choose. Obvious exits: light and darkness. Time seems to have no meaning as you wander aimlessly amidst the uncomfortable tugging for your attention. Hopelessness washes over dreams you once held like the creeping tide of doom. In time your soul finds a home, be it in the light or the darkness, but not again in the mortal world. As the last memories of your existence fade, an image of the Goddess Lorminstra, who guards the Gates of Oblivion, tempts your hindsight. [Purgatory] It appears that your mortal life has ended once and for all, and that Lorminstra shall be embracing you shortly. This Purgatory is here to provide you with information about what to expect as you move on to the next stage of your existence. Before you is The Afterlife. You will need to enter it in order to create a new character for yourself. ---> You can LOOK AT THE AFTERLIFE to get information about what to expect now that your character has died permanently. When you are ready, simply RETIRE. Obvious exits: none. DEAD>look at the afterlife DEAD> Upon entering The Afterlife you will be given two options: 1. Retire Bardon only (keeping the K'ta'viiri family) 2. Retire the K'ta'viiri family (loosing all family fame) Selecting the first option will result in asking you for a new first name for your new character, while the second option will result in asking you for a new first and last name. In either case you can reselect your old names, but your family fame will only transfer to your new character if you select the first option. DEAD> As for up to the point of making your choices, it is the same routine as if you just started a new character. If you RETIRE the family, you will lose your character entirely. If you choose to RETIRE the first name only, You will be able to keep the same family name as well as the same first name if you wish to keep it. If you choose the same first name and family name, you must remember, when you went demonic, you lost everything except the name. You will not have any items, character fame, stats, skills, age or trainings as you did when you died, including any coins you had in the bank or on your person. In keeping the family name, you WILL still have your FAMILY fame but not the character fame.
There are special unusual circumstances where it is possible to sacrifice your soul to the dark gods. In the past the end of this messaging probably only happened if you had deeds, without the survival wording in the other situation. The messaging reflects the archaic lore for Lornon and Luukos, as the gods documentation has been changed a few times. There are a few variations of this script.
DEAD> Slowly the world begins to dissolve in a vortex of utter blackness... [Lornon] You find yourself in a barren cavern of black ice, totally alien to your sensibilities. There are no exits in the seamless dark walls, and you wonder what forces have brought you here... The Dark God Luukos appears before you in a sudden flash of stinking brimstone. Your eyes follow his tall, muscular form up to his lizardlike head, and meeting his cold, slitted eyes you begin to fear for your very soul. Luukos looks at you with displeasure. "You seek to honor me with a sacrifice?", he hisses angrily. "Perhaps if you were not so weakened from such a recent death, you would present a more appetizing picture." Luukos reaches into your soul and tears it out by the roots, flinging you away from himself when he is finished consuming it. To your surprise, you find yourself with a tenuous grasp on the universe, and your sole thought as you fall seemingly forever is that of amazement that you still live . . . Your fall is broken by the hard earth beneath you as you awaken, dazed and bewildered, but alive nonetheless...
This exit point is the Ghorsa Isle Tower rather than the Altar of Lorminstra. There are other idiosyncratic death messages on Teras Isle, such as an out of body experience when departing.
XXXXX falls from nowhere to the ground in front of you, landing with a hard *THUD* and lying still, seemingly dead. (note: they are not actually dead)