A little bit of background:
In Marvel comics, Amahl Farouk is one of the most powerful telepaths in the world, but he gets in a fight with Professor X, who banishes him to the Astral plane, so that he can't harm normal humans (yes the same Astral plane in the Dr Strange film). However, he can still access telepathic mutants and often possess them. He once possessed Phoenix.
Farouk is a big fat man. In the Astral plane, he has with yellow eyes and is called the Shadow King.
Also, we know that Legion (David) is Professor X's son, even though that hasn't been revealed in the show
A couple big revelations from last night:
David was neither in his memories nor elsewhere on earth. Instead, he was on the Astral plane.
The "Monster" with yellow eyes is not part of David's subconscience but rather an inhabitant of the Astral plane who possesses people "like a parasite". Therefore, since the "Monster" has appeared in David's memories, it means that David has been under assault since before he entered rehab.
Since childhood, David has been interacting with things only he can see. Notedly as a child, he talked with a dog named King (as in Shadow King).
The Monster has warping David's memories and manifesting himself as other people (specifically Lenny)
Takeaway:
At this point, I'm 90% confident that the Monster is the Shadow King, who is taking revenge on Professor X by attempting to possess his omega-level mutant son and has been doing so since childhood, which leads to all the confusion about erased memories.
Also, this changes the entire dynamic of the show. It began as a battle between Summerland and Sector 3 for possession of David while David was trying to get his head straight. Instead, now it becomes a triangle with the Shadow King trying to possess David and steal him from both Summerland and Sector 3.