Sheo was once the Daedric Prince of Order, Jyggalag. The sphere of his power was so great, the other Daedric Princes were actually afraid of him, so they worked together to curse him and thus was born Sheogorath, the Daedric Prince of Madness. Eventually, with the aid of Sheo, the Champion enabled both sides of his personality to be separated and they became separate Daedric Princes.
"I once dug a pit and filled it with clouds....or was it clowns.... it doesn't matter, it didn't slow him down. But it really began to smell! Must have been clowns. Clouds don't smell, they taste of butter. And tears." -Sheogorath-