He was created in a contest for making up a scary character. It began with Marble Hornets.
Why is it used? It's a part of the "pop culture" magick that has been ridiculously popular with many young neopagans.
The closest actual being in folk lore close to Slenderman which many believe he was constructed from, is Der Grossman, a black elf king said to haunt the Black Forest of Germany and kidnap naughty children. The child abduction part was a scare tactic to keep kids from wandering into the woods. Basically, Der Grossman is a nature spirit on the darker side of things. Later, and more popularly, he was known as the "boogey man".
So, when you read headlines about Slenderman and think it's so concerning, replace the name with the "Boogey Man" and you'll see how ridiculous these people really are.
Unless of course, you really are in the Black Forest of Germany. Then, I wouldn't laugh. In Iceland, they recently stopped the construction of a road because it happened to run through elf territory. True story! They take that stuff there seriously.