Olo is a weird being (arguably even by the standards of the Terrace) who only shows up in people's dreams. He or she does seem to be an independent being, however, and not a mere figment of the inhabitants' imaginations, as evidenced, for instance, by his or her ability to relay messages between dreamers. (Having no apparent gender, Olo goes by either pronoun, only occasionally and inconsistently expressing a preference for one over the other.) Though the precise extent is uncertain, Olo does show some ability to change and control the dreams he or she appears within, and isn't above using this ability to manipulate the dreamer's emotional state if it suits his or her purposes.
Olo is not confined to the dreams of the Terrace's residents, but can apparently appear in the dreams of people outside as well. He or she confines him/herself mostly to the Terrace's dreams by the orders of Pretorius Technologies, though he or she has been known to pop into an outsider's dreams to gather information or to serve some other motive.