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The Carnival Queen, also known as the Cacophony, was a gestalt entity, the living personification of irrationality created after the early Time Lords expelled the irrational parts of the souls outside the rational universe. (PROSE: Christmas on a Rational Planet)
Origin
Long ago, the Universe was a wild and irrational place until the early Time Lords created logic and rationality. Before the Time Lords, no laws of physics or guiding principles existed, only infinite possibilities. (PROSE: Cat's Cradle: Time's Crucible) After they imposed order, the Universe became a clockwork set of rules which they could predict and control. Under the leadership of Rassilon, the Time Lords then cast out the irrational parts of their souls as their last act in an irrational universe. This created a gestalt of superstition which congregated as a great cloud in the upper atmosphere of Gallifrey and was banished from the newly rational universe, imprisoned by Rassilon in a tiny corner of creation, the Time Vortex. The Time Lords then forgot about the Carnival Queen and did not allow themselves to dream of her. (PROSE: Christmas on a Rational Planet)
However, the Carnival Queen continued to live on as the personification of irrationality, influencing reality from her prison. She nurtured psychic abilities in humans and indirectly gave rise to the Shadow Directory and events of Yemaya. (PROSE: SLEEPY) She knew the Time Lords as the Watchmakers, Rassilon as the first King of the Majestic Clockwork, and considered the Gynoids her children. (PROSE: Christmas on a Rational Planet)
I’m the one who starts the carnivals, Christopher Cwej. The one who makes the music that plays when civilisations fall. Sister to superstitions, grandmother of gynoids. The spirit imprisoned in every piece of clockwork. Matheson Catcher would call me the enemy of all humanity, which seems funny, when you consider how long he’s been under my spell. Call me Cacophony. Call me the Carnival Queen. And I’m very, very happy that Marielle has let me back into the rational universe.
Powers
The Carnival Queen herself has been shown to be incredibly powerful, she created a billion possible universes with only her arm movement alone. Her return back in the universe caused irrationality and magic to be reintroduced throughout space-time, destroyed the laws of physics and nature in favour of the supernatural, broke through Gallifrey`s defences with a small fraction of her power, and caused linear history to become distorted. She possesses knowledge about all human history, the origins of the Great Old Ones, and the history of the Dark Times. The Carnival Queen was stated to have an infinite number of eyes that always watch and was capable of existing outside space-time. (PROSE: Christmas on a Rational Planet)
The Carnival Queen described Gynoids as her children. Gynoids were robots that looked like women, not built but simply were from existing outside of causality. They had a distorting effect on reality. (PROSE: Christmas on a Rational Planet)
She fits into science as a personification of a potential Kuhn Paradigm shift in the way the consciousness of observers collapsed mixed-state events. (PROSE: The Death of Art)
History
The Carnival Queen was allowed back into the rational universe by a combination of Marielle Duquesne's psychic probing of the Time Vortex and Chris Cwej's tampering with the TARDIS. Chris is then transported to an irrational desert, the home of the Carnival Queen. There, the Carnival Queen explains her origins and states her intention to undo the curse of the Time Lords and spread irrationality throughout the Universe again.
Meanwhile, the Seventh Doctor restores his TARDIS and focuses on stopping the spread of the Carnival Queen`s chaos across the universe. During this time, the Carnival Queen`s influence begins to affect the Time Lords and Gallifrey, where the President Romana suffers an epileptic fit and inadvertently releases three hundred prisoners from Shada, including Grandfather Paradox of the Faction Paradox.
The Doctor finally locates Chris and the Carnival Queen in the middle of a Gynoid city. Chris is then given a choice of deciding the fate of the universe, if the universe should be ruled by the Time Lords` order and structure or the Carnival Queen's chaos and uncertainty. Chris makes the choice of preserving reality, as what the Carnival Queen offered was too much for him to handle. The Carnival Queen leaves to return back to its prison outside the universe after further being convinced by the Doctor, only continues to watch over history with the knowledge that Chris had made the wrong choice in the end. (PROSE: Christmas on a Rational Planet)