The Balefire is a messenger for the Nameless One. It manifests as a burbling column of dazzling, white light that shines into the sky like a beacon. The exact nature of its message is unknown but it seems to be to summon the Nameless One. Dungeon Master specifically describes the Balefire as a messenger and not a message and it can be heard to babble as though speaking, suggesting that it is an intelligent entity of some sort.
The Balefire is kept in the padlocked Box of Balefire. The purpose for this is unknown but the padlock suggests a prison even though the padlock was rudimentary and easily broken by Eric with a stick. Possibly the Balefire entity was imprisoned to prevent it messaging the Nameless One or perhaps the relatively unsecured box is just a storage vessel for the Balefire so that it could be opened at a future time by some tyrant or cult to implement a doomsday scenario.
It is not known whether the Balefire is a unique entity or whether there are others on different worlds in similar vessels waiting to summon the Nameless One.