The writers have a villain, and they want to give that character some depth. The obvious solution is to Pet the Dog. Unfortunately, that tends to make the character less scary, causing Badass Decay and Villain Decay.
Instead, writers may keep the villain (especially The Sociopath) just as vile as before, but reveal that they have a reason for being that way. The most popular one is the Freudian Excuse: the villain had an abusive and particularly violent childhood (such as Abusive Parents, being bullied by peers, etc.), making them insane and warping their perception on the universe, and that's why they're sociopathic Serial Killers going on a Roaring Rampage of Revenge, or why they want to destroy everything out of their misery, or why they're Straw Nihilists who adhere to The Social Darwinist philosophy that it's a Crapsack World where Might Makes Right. Sometimes, this is done for deliberate Badass Decay, but usually it isn't. The villain is as horrible as ever, only now the audience can look at them in a new way.
Unfortunately, just like a Pet the Dog moment, the Freudian Excuse sometimes fails to give a villain any depth at all. If the villain is particularly evil, it can come across as an illogical and lame Non Sequitur: "his father beat him, and that's why he's an Omnicidal Maniac." Even if the villain's crimes are proportionate, the writers have to strike a hard balance. Too much emphasis on the excuse, and it looks like they're attorneys justifying the villain. Too little, and it is a fallacious Appeal to Pity that looks like a ridiculously gratuitous scene of Wangst. However, this can in turn be highlighted in-story if the other characters point out that Freudian Excuse Is No Excuse. In cases of Complete Monsters, it fails to justify anything, merely explaining their origins and nothing more. It could even be used to make the character worse, since they reject the possibility of ever getting over their trauma and changing their ways.
Most importantly, the Freudian Excuse does not involve the character growing or changing; it explains why they haven't changed, and in fact, often serves as a signal that they cannot and never will. Bad writers often think that the excuse can substitute for Character Development, but it does the exact opposite. Good writers know the excuse has limits, and watch them. If done shrewdly enough, it may lead the audience to Cry for the Devil. A Freudian Excuse is often invoked to explain how someone who Used to Be a Sweet Kid became such a monster instead - again, much writerly skill is generally needed to pull this off and make it poignant rather than pathetic.
The excuse can be played with in many ways. One way is to use it to show how pathetic a villain is — after the villain gives a Breaking Speech, a hero's classic rebuttal is "says the guy who became a hit man to work out his daddy issues." The second way is for the villain to sneer at the hero's pity for them, even exploiting it in a fight. (Further, the villain is protesting far too much.) A third way is to simply present it as an explanation rather than a full excuse. Sometimes the author simply shows what warped the character into what they became without expecting the audience to feel any more sympathetic toward the character- a sort of psychological How We Got Here. And a fourth way is to use the Freudian Excuse as a justification for a HeelFace Turn; if the villain gets treatment he no longer has any reason to be evil and may pay the heroes back out of gratitude.
Many Crime and Punishment Series (and Darker and Edgier superhero comics) are notorious for Writer on Board stories deconstructing the Freudian Excuse. At least once per storyline, there will be a slimy psychiatrist or defense attorney who declares that the Neck-Chopping Killer is merely a victim of circumstances, and it's the hero who should be locked away. These stories tend to end with said psychiatrist or defense attorney getting murdered by the killer, which is depicted as poetic Irony.
However, not all examples of Freudian Excuses have to involve evil or villainous characters. It can also be used to explain the neurotic behaviors of even heroic or otherwise neutral characters.
See Freudian Excuse Is No Excuse for deconstructions of this trope. See also Dark and Troubled Past, Start of Darkness, Monster Sob Story, Jerkass Woobie, Abusive Parents, Parental Neglect, Parental Abandonment, "Well Done, Son!" Guy, Single-Issue Psychology, Tragic Bigot, Being Tortured Makes You Evil, Woobie, Destroyer of Worlds, You Are What You Hate, He Who Fights Monsters, and Who's Laughing Now?. Takes the "It's Nurture" position of the "Nature vs. Nurture" argument; for the Nature position, see In the Blood. Contrast Upbringing Makes the Hero.
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- The Human Pet: The last upload reveals Sam's motivation for his kidnapping, murdering and torture is that his parents were horribly abusive to the point of driving him mad.