Mephisto is a character heavily tied to Wanda and her twins. In the comics, Wanda's magical powers create her twins, using fragments of Mephisto's soul. Mephisto later absorbs the twins, effectively ending their lives.
It's possible that this storyline is playing out in the show — or a version of it, at least. Some fans believe that Mephisto is keeping Wanda and the twins in this reality until the latter start manifesting powers, at which point he will absorb them (hence the creepy "for the children" comments in Episode 2).
There have been hints of Mephisto's presence — Bev's comment that "the devil's in the details," and Agnes's response, "That's not the only place he is," in Episode 2, could refer to him, since he's often associated with Satan. One fan has even suggested that as a shape-shifter, he's literally appeared in each episode, taking the form of a different animal each time (lobster, rabbit, and stork). In this case, the rabbit's name being Señor Scratchy could be a hint that he is the "devil."