Unknown to us for the first four seasons, Dawn shows up in Buffy vs. Dracula, and every one seems to know who she is. Buffy soon finds out that she doesn't really have a sister, that dawn was created by a spell. Several monks, guardians of the Key - an ancient mystical energy, with the power of opening all dimensional portals - were hunted down by a God named Glory who was after the Key. To protect it from her, they made it human and sent it to Buffy. They cast a spell that created memories of Dawn in the minds of everyone.
When Dawn found this out, already going through her teenage crisis, she became very difficult. After the novelty of being some mystical being wore off, Dawn finds herself more and more lonely. When her mother dies, she ends up alone with Buffy, who has to deal with slaying and regular life. Dawn starts shop-lifting and getting herself in trouble, she also has the odd wobbly here and there, making Buffy's life more and more difficult.