Lunatics

Insanity Unleashed
During the events of Batman: Arkham Asylum, the most hardcore and utterly deranged of the many grim cases at the asylum, known simply as Lunatics, were all let out of their cells by The Joker to serve as diversions for Batman while Joker perfected his plans to destroy Gotham. These are true patients of insanity with no grand designs or iconic motifs, but only the purest form of madness driving them. Among the oldest patients at the asylum, they have become warped of all senses from the inhuman torture and mutilation that they were subjected to for experimental purposes over the years.

These unfortunate patients cannot truly be described as henchmen of The Joker as he has no control over them and simply used them to create further chaos for Batman to neutralize. Over the course of the long and brutal night at Arkham Asylum, nearly all of these patients were completely wiped out by either Joker's men or Poison Ivy's plants. The few survivors were taken to the medical facility to be treated for injuries, yet their mental state would forever remain lost.

The Truth Behind the Madness
It is revealed in the Arkham City Stories, "Illegal Operations" and "Hugo Strange's Experiments" that the Lunatics were a product of Hugo Strange's mind control research while he was still working at Arkham Asylum.

Illegal Operations: While in residence at Arkham Asylum, Hugo Strange experimented on prisoners as part of the process leading to him unlocking the workings of the mind in order to control it. In order to cover up his experiments he arranged for these poor individuals to be lobotomized, locked up in the cells and forgotten. It was during these experiments that Strange perfected his ability to place hypnotic suggestions in the minds of his victims, a technique he used to guarantee absolute loyalty from his handpicked TYGER guards. After escaping from custody, the Joker released the lunatics and allowed them to roam free across Arkham Island in an attempt to stop Batman.

Hugo Strange's Experiments: Now in charge of Arkham City, Strange continues his radical experiments into the workings of the human mind. During processing, Strange personally selects inmates that fit his criteria and has them taken away to his inmate Behavior Analysis Unit. No one knows what happens to the missing prisoners in that room except Strange himself. Sometimes they emerge lobotomized to roam the streets, but more often they are never heard from again. Some people believe that Strange brainwashes them into his TYGER guards whereas others believe he has a deal with the Penguin and hands him them to use as target practice.

The Penguin's 4th interview tape seems to confirm the deal between him and Strange, providing him with the Behaviorally Modified Inmates/Lunatics created via Strange's experiments (who the Penguin refers to as "dribbling monkeys") to be use for by the Penquin and his henchmen for target practice.

The Riddler's 2nd interview tape indicates that the procedure that created the Lunatics, allowed Strange, through the assistance of the Mad Hatter, to develop the special medication Strange used to manipulate and control Warden Quincy Sharp, who later became mayor.

Trivia

 * In the early development, as environment artist John Gravato explains, the lunatics were meant to be infected with Titan. Later the idea was scrapped out of production.
 * At least one of Strange's victims apparently somehow was able to endure the procedure and told TV reporter Jack Ryder that Strange caused his mental breakdown. It is likely that this knowledge, plus Ryder's digging in Strange's background result in his arrest by TYGER guards, so he could be killed by Strange's contract killer.


 * In one of Eddie Burlow's comments to Batman at the end of the game, he suggests that Vicki Vale should ask Sharp where all of the lunatics from the Asylum ended up.