The Madness Monster has always existed inside Warlock‘s mind. It has described itself as the sum of all of Adam’s worst impulses, those things that he keeps most suppressed. The Madness Monster lurked within the “Door of Madness” inside Warlock’s mind, which was part of the twisted “clown world” he experienced due to the Matriarch’s brainwashing technology.
Warlock learned that the Magus had planned for him to submit to madness all along. Madness was only the first step in transforming Adam’s mind into the Magus’. The encounter with the Monster helped Adam access certain extrasensory powers that he would only fully realize as the Magus.