Svengali was the maleficent hypnotist in the novel 1894 Trilby by George du Maurier. In the novel Svengali hypnotizes Trilby, and enslaves her. While under hypnosis she is able to sing superbly, and Svengali becomes her 'manager'. He lives off of her earnings, and alternatively bullies and flatters Trilby into submission. Since she cannot perform without his help she becomes increasingly dependent, until she cannot survive (literally) without his hypnotic help.
Trilby was one of the first novels to bring hypnotism, and its possible abuse, to the attention of the general public. As a result the words 'Svengali' and 'svengalian' have entered our language. The meme of the evil hypnotist also lives on in B movies everywhere.
It is now used to describe someone who tries to persuade, manipulate, or force people to do his bidding for evil purposes. Not surprisingly, it is often heard in the music industry, although it is by no means limited to that context.
See also: Machiavellian.