Ascended Fanon: Ermac was originally a bit of misunderstood text on a debug screen in MK. Fans believed he was going to be a playable character. Midway took the playable bit and canonized it. Likewise, his palette (red) was merely a graphical error. The costume used to record the animations for the masked fighters in the original game was red and if the game couldn't load the right color, it would default to this. When he was made an official character, he was given that same red hue.