Just who is Legato? Well...that depends on which version of Trigun you're watching (or reading). In all versions, he has blue hair, manipulative powers, and is associated with Knives - he sort of parallels Wolfwood while his relationship with Knives offers a contrast to that of Vash and Wolfwood. It's how Legato's relationship with Knives plays out (and how he relates to Vash) that varies slightly between versions of the series.
During the first part of the manga (which is just called "Trigun"), Legato closely parallels his anime counterpart right up until Jeneora Rock. Wolfwood and Conrad are both present at Knives' rebirth, with Legato shedding a single tear as he witnesses Knives emerge. Unfortunately, he also notices Vash and gives orders to kill him in defiance of Knives' wishes...so the literal first thing Knives does upon waking up is crush Legato into a cube. Ouch.
Legato spends most of the rest of Trimax in a metal sarcophagus slowly going insane. As it turns out, he has been carving up the inside of the sarcophagus into nanofiber filaments for the system that he uses to manipulate people from a distance in this series - he embeds virtually invisible wires into the arms and legs of his victims and then activates them to get his victims to do his bidding against their will. The skull on his left arm had a functional purpose in this series: it opened to contain a spool of the aforementioned filament. Anyway, he makes more wires with which he learns to control himself, and then goes and has a fight with Vash. In this version of Trigun, as in the original anime, Legato gets Vash to kill him with a single bullet to the head.
This version of Legato is the only one (so far) to get a backstory - and man, is it a doozy. Legato was originally a nameless teenage slave living in a fortress town in which it's implied that he was put to work as a prostitute. It's during this time that he develops the string system that will later become his signature weapon - the strings are shot from bracelets much like Spider Man's web shooters. Legato tries to manipulate all 1300 people in the town at one time but is unsuccessful. He is captured and subsequently punished by being chained to a Y-shaped cross and raped. (Yes, they actually drew the rapey part.) This is what Knives interrupts when he destroys the town. Knives is the first person to ask Legato's name, to which he replies that he doesn't have one. Legato declares that he either wants to go with Knives or die. Knives, for reasons that are unclear, decides to let Legato tag along. The manga never says how Legato chose or received his name.
The 1998 anime series starts off closely paralleling the first volume-and-a-half of the original Trigun manga. Legato first shows up in episode 12 just before the fight with Monev the Gale. He threatens Vash's life, threatens to kill the townsfolk, and feeds a kid a hotdog. He announces that Vash will have to fight the Gung-Ho-Guns, but unlike the manga this does not involve a coin case.
Legato turns up again at Jeneora Rock, where the series first starts to diverge from the source material. He slaughters a gang of slavers in the saloon there when one of them tries to start shit with him, but instead of leaving and going up to a church, Legato leaves and climbs up to the massive windmill that powers the town. He and his henchmen proceed to slaughter half of the remaining gang members (because reasons). After this, Legato turns up in the city of Augusta, to which he lures Vash and causes his Angel Arm to activate. Vash puts a crater in the moon, and Milly, Meryl, and Midvalley get to see first-hand what Vash is truly capable of doing.
Legato turns up again in the "Flying Ship" episodes, when it's revealed that henchmen of his have infiltrated the ship. Leonoff reports back to him as he, Hoppered, and Grey the Ninelives wreak havoc. It is here that he finds out Wolfwood has turned traitor, playing right into Legato's hands. Wolfwood is visited by Chapel the Evergreen - his old teacher, his mentor, and the closest thing he had to a parent - and they end up having a duel. Wolfwood wins the duel, but Legato takes control of Chapel's body and makes him shoot Wolfwood in the back. Of course this devastates Vash, but Chapel is not happy about it, either. He tries to confront Legato but is...unsuccessful. Legato leaves to go find Vash and torment him one last time - and it works, at least partially. Vash is forced to kill him to save Meryl and Milly, and he dies from a single gunshot to the head - the only human that Vash has ever deliberately, knowingly killed. Holy shit.
In this series, Legato's powers derive from having Vash's left arm literally grafted to his body - he mentions this in episode 24. This is the arm that Knives shoots off just before Vash blows up the city of July in flashback. The arm gives Legato the ability to psychically override a person's mind and take control of their body to do his bidding - the victim in question may or may not be aware of what's happening during the process. Legato can also communicate telepathically and create false mental images if he chooses. I also speculate that the arm graft may have slowed down his natural aging process as well (he mentions that July got nuked 23 years prior to Augusta, and he doesn't look a day over 30, if that).
From what I've seen in Trigun: Stampede so far, Legato seems to be like a "Grand Inquisitor" of some sort - heading up the Eye of Michael cult and whatever it gets up to. He is first seen in episode six just after Wolfwood tries to escape by jumping through a giant window. The doors to Wolfwood's cell open, and Legato more or less tells Wolfwood that he's working for the Eye of Michael now. Wolfwood defies him, which leads to Legato using physical violence in an attempt to subdue him - and when that doesn't work, extortion. Legato produces Livio, the closest thing that Wolfwood has to a brother, and says that if Wolfwood isn't willing to take the job, then they'll have Livio do it. Wolfwood gets slammed into the ceiling for some reason [check on this] when Conrad comes up and puts a stop to it, getting Legato to stand down. Conrad reprimands him by saying, "You mustn't defile life!"
Legato appears again with Zazie the Beast when he decides to track the sand steamer that Wolfwood and Vash boarded for the city of July. A grown Livio appears on deck, and he and Wolfwood fight like crazy until Livio ultimately shoots himself and flips over the deck railing to the ground below. Legato uses his weird powers to break a drive shaft in the sand steamer to get it onto a crash course with the orphanage that Wolfwood and Livio lived at as children. His reasoning is that if he can break all ties that Wolfwood has with other people (outside of the EoM), he can make Wolfwood into the perfect servant of Knives - the man will naturally gravitate toward the cult and its ideology once he has nothing else left. Anyway, Legato gets a little too impatient and is ultimately unsuccessful.
In this series, Legato uses his left arm to manipulate physical objects without physically contacting them. He keeps this arm fully sheathed in the left sleeve of his jacket (with a little glove and everything). That sleeve also bears a skull emblem, which possibly acts as an amplifier. Though the series has not detailed how Legato got his powers yet, I suspect that it has to do with the experimenting that Conrad is doing (it can't be Vash's arm like I originally thought, because that got chopped off and sucked up by a black hole in episode nine XD;). Perhaps Conrad injected Legato with cells from a gravity plant...it remains to be seen.