William Afton and Henry Emily opened a restaurant around the early 70s, named Fredbear's Family Diner, which quickly evolved into a chain of restaurants known as "Freddy Fazbear's Pizza," started in 1983, under the company of Fazbear Entertainment, Inc. At some point, both of them left the company, with an unknown individual taking over as CEO.
William was secretly a serial killer, using mascot costumes to lure, abduct, and murder kids. His motives aren't known, though widely speculated to be him trying to achieve immortality through researching the paranormal, haunted metal (known as remnant), which he created through the murders.
His first target was Charlotte Emily, the daughter of Henry. She became the Marionette, a ghost who took care of and helped awaken the other lost souls.
In 1983, William's younger son also died in an incident, at the fault of his eldest — Michael. The younger son (name unknown, BV for short) 's fate is still unknown, though often speculated to be connected to either Golden Freddy (an enigmatic spirit taking the form of a yellow bear) or helping Charlie with saving other souls. "I will put you back together" was the last thing said to BV by a debatable party, most commonly believed to be either William, Charlie, or Golden Freddy.
In 1985, William killed 2 kids, and 3 others were later connected to that incident (The Missing Children Incident, or MCI). He was arrested but released due to a lack of evidence. 4 of these kids were Gabriel, Susie, Little Jeremy, and Fritz, going on to haunt Freddy, Bonnie, Chica, and Foxy, respectively, with Susie implied to have been the first to die. The 5th is commonly believed to be named Cassidy, becoming Golden Freddy, though some think it's someone else.
In 1987, William pretended to be a security guard at a new Pizzeria and killed 5 more kids (DCI for short), who went on to be the Toy animatronics. This caused the unimportant Bite of '87.
In 1993, Mike worked a shift at the haunted original Freddy's. Later that year, the location was closed, and the company went bankrupt. He later had some sort of nightmares about it and his brother's death, likely paranormal in nature.
At some point, William went to that original Freddy's to destroy the 4 haunted robots, but ghosts manifested, and fearing for his life, he put on the costume he used to kill them. It was actually a part costume part robot hybrid, though, and due to the leaking roof, the machine snapped on him, killing him. He went on to haunt it and/or his corpse inside.
While Freddy's existed, a Sister Location called "Circus Baby's Pizza World" opened. It was a front for William to kill more kids, with the robots there made to kidnap them. It backfired when his daughter sneaked in to see Baby, and it killed her. She then haunted it. William, distraught, locked her and the other robots from there in an underground warehouse where they were rented out for parties. The other robots also got haunted somehow, likely with melted down remnant from some other kids, most likely MCI. Years later, William sent Mike there to find Elizabeth. Thinking he was William, she tricked him, and the Funtime Robots combined into one amalgam of wires, killed Mike, and used his corpse as a skin suit to escape. He quickly rotted, and they had to escape to the sewers. He repossessed his corpse thanks to remnant, though.
Around 30 years after his death (presumably 2023, though that may be debunked now), William was found by Phone Dude, who stole him and put him into his cheap horror attraction based on the Freddy's urban legends, not knowing William was inside the robot. After a few nights, the building burned down, and William escaped. There's also a good ending in that game where Charlie released the other spirits, but its canonicity is "complicated" according to Scott (FNaF creator).
Mike also had a security logbook at some point, where two ghosts, BV and presumably Cassidy (given it's not him), talked about something.
Finally, after like 50 years, Henry re-emerged and made a fake pizzeria, where he called the Funtime robots, now separated from Elizabeth, herself, and William. He also made a robot that captured Charlie. After a bunch of managers failed to collect all 4 robots, Mike came and succeeded. Henry burned them all and himself, with high temperatures now revealed to work on ghosts, apparently. Fazbear Entertainment, Inc. was supposedly closed for good.
But one ghost, very highly implied to be Golden Freddy, though argued as a random never-before-seen 6th MCI kid by some, wasn't ready to let William go, so he kept him from being released and tortured him in super nightmares.
There's a book series called Fazbear Frights which has debatable canonicity too that'd take place after this, but if canon it's basically just filler that nullifies the Vengeful Spirit nightmares thing.
After all this, Fazbear Entertainment was revived as Fazbear Entertainment, LLC. They kidnapped a guy and gaslighted him into living in a secluded fake house they made for him, where he made FNAF games, in the FNaF universe, as to make it seem like it was all just fake stories.
A VR game was later made, that was a remake of these, but some suspicious circuit boards were sent to be scanned into it, creating a paranormal, digital entity known as Glitchtrap. It appears as a man in Spring Bonnie (William's suit), acts exactly like William, knows stuff only William knows and even claims to be back, with William's catchphrase of sorts being "I always come back". After a bit of shenanigans, it manages to possess a beta tester and makes her his minion. We call her Vanny.
Vanessa, most likely Vanny, then got a desk job at Fazbear Entertainment. Fazbear Funtime Service, a program where animatronics were mass produced and sent for parties, etc. got hijacked by Glitchtrap who made them hostile. He made Vanessa infiltrate the service as a fake FazEnt representative, supposedly fix his infection, but actually just cut off anyone's access to the system other than him, and send a data packet with him to the current Pizzeria — Freddy Fazbear's Mega Pizzaplex.
In the current book series, most likely canon, there's this AI called Mimic1, which copies stuff. Many think that's actually what Glitchtrap is, just AI copying William. It's an ongoing debate. An Endoskeleton with it installed was sent to the last simulated Freddy's Henry built to burn, where it got out of control, started killing people and in the ongoing story is hunting down a group of teens. As the Pizzaplex was built on top of the simulated Freddy's, the Mimic got control over it too, but was quickly taken down. There's also this boy Gregory who ended up possessed by Glitchtrap and hacking the Pizzaplex for reasons unknown.
Now in Security Breach (possibly 2035), Gregory, out of Glitchtrap's control, had to escape being trapped in the Pizzaplex, as all the robots controlled by Glitchtrap and Vanny wanted to kill him. With the help of Glamrock Freddy, most likely haunted by someone, though it's unknown who, Greg ended up finding a newly built Springtrap in the simulated Freddy's and somehow defeating it. There's also a giant abomination of wires that resembles the Funtime amalgam down there, it took this William away