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They breathe underwater and feel no fear. Better watch out.
The Forsaken are a splinter faction of the Scourge lead by the Lich King, and made up of undead humans and elves that have developed wills and minds of their own, forging their own way in the world of Azeroth.
They are lead by the Ranger General Sylvanas Windrunner, who was formerly one of Arthas' chief lieutenants, but rebelled from his leadership in memory of her past life as a high elven hero. She made her home in the crypts below the ruins of Lordaeron, the former capital of the humans. There, she plots against the Lich King and gathers her power as more undead break free of the influence of Northrend.
The Forsaken have minds just like other mortal races, but they are quite dead. Their alliance with the Horde is seen more as one of convenience, and partly because Sylvannus blames the Alliance for the destruction of Quel'Thalas and her own transformation into a banshee. The Forsaken tend to have a looser view of morality than the mortal races, as they do not value life terribly much, having none themselves. Experiments on the mortal races are conducted in the Apothecary of the Undercity, where they make their home. The other races of the Horde do not trust the Forsaken as much, making it so that they start out with a lower reputation rating with other Horde races. Even so, not all of the undead could be considered "evil" and have many different personalities.
Undead players can choose between the Mage, Priest, Warrior, Rogue and Warlock classes. Their racial mount is the skeletal warhorse. Their racial powers are cannibalize, will of the forsaken, underwater breathing and shadow resistance. None of their abilities lend themselves particularly well to any single class, but their unique appearance and background make them a popular class for players looking for a creepier character to play.
Cannibalize allows the undead character to regenerate 7% of their health every 2 seconds for 10 seconds duration so long as they have a humanoid or undead corpse to chew on. This makes it so that they have less downtime while leveling - quite useful particularly for Warriors and Rogues.
Will of the forsaken is an excellent PvP ability that makes the player immune to all fear, charm and sleep effects for five seconds on a two minute cooldown. They can use it even while under these effects, allowing them to break out of it. This makes undead players particularly tough opponents for Priests and Warlocks to face down, and it gives undead warriors two fear breaks at their disposal.
A collection of overviews of the various races in World of Warcraft.