Deadpool, a popular Marvel Comics anti-hero, was born Wade Wilson. He grew up without any particularly nasty ambitions, eventually serving as a successful soldier the United States army until he was diagnosed with incurable cancer. The covert Weapon X program located him and promised to treat him if he agreed to their rather unorthodox techniques: mutating him with an extract of Wolverine's natural healing factor to give him an artificial one. The healing factor, they reasoned, would cure his cancer and make him an even more powerful soldier to boot.
Unfortunately, the healing factor didn't work as planned; it kept him alive without actually curing the cancer that was now spreading throughout his body. Wade was sent to a prison facility for other "rejects" of the Weapon X program, where they were kept secret from the general public and occasionally (and cruelly) experimented on further. It was here that Wade adopted his future name; the prison "dead pool" was a betting game around which prisoner was likely to die next. Wade was kept alive the longest due to the partial success of his procedure, giving him the longest odds in the pool.
Eventually, Wade's ongoing feud with the prison's head guard, Ajax, lead to his death through the sudden and non-surgical removal of his heart. The shock triggered his artificial healing factor to full strength, repairing his missing heart and restoring his physical strength, while at the same time permanently exfoliating and scarring his skin and driving him slightly mad.
After killing all the guards in the prison, Wade left and began his new career as a mercenary, adopting a red and black mask and full-body costume along with the name "Deadpool." His ongoing smart-ass repartee, both a product of his insanity and a tool to distract his target, is how he came to be called the "merc with a mouth." His first appearance in the Marvel universe was when he was sent by Stryfe (using the alias "Tolliver") to eliminate Cable, who had just joined the New Mutants as their new teacher.
Deadpool's "home" turned out to be in San Francisco, in an ordinary townhouse which he transformed inside to match his vicious insanity. A blind, elderly and thoroughly angry woman named Al (short for "Althea") became his prisoner, providing him with food, laundry and company as well as some mental stability. He became infatuated with Siryn, a member of X-Force who held faith that Wade could be a virtuous person with the right encouragement. And the interdimensional holding firm known as Landau, Luckman and Lake became personally interested in him when their psychics predicted he would save mankind from a monstrous threat nicknamed Tiamat. All these influences, among others, gave Deadpool the motivation to become a sort of kinder, gentler mercenary. He didn't quit his job, or killing, but at least he's more moral about it, and Al has long since been freed.
Deadpool is an expert in martial arts and pretty much every common type of handheld weapon known to man. The healing factor that regenerated his heart also regenerated a severed hand at one point, but since then events have reduced the strength of this power--he can regenerate tissues and heal bones and poisons, but not entire organs or body parts.