August Derleth wrote a short story entitled "The Lonesome Place"; in the narrative, a boy and his friend Johnny as children had to pass by a grain elevator that was in the dark, without any street lights if they were to go down town. This was "the lonesome place," a place that they were only afraid of in the night; whenever they had to pass it alone at night, the boys would race because

...there was something in that dark, lonesome place. Perhaps it was the bogey-man....Perhaps it was something else, something worse.

The boys imagined that they hear steps pursuing them and they were filled with terror. When they saw the lonesome place in the daytime, there would be a pile of lumber tipped over, suggesting that there was something that inhabited the place. As they grew older, there were other little boys who felt the same terror. Then, a boy named Bobby Jeffers was killed in the lonesome place. The boy narrates,

I knew, too, that Johnny and I were guilty. We had murdered Bobby Jeffers because the thing that killed him was the thing Johnny and I had created out of our childhood fears and left in that lonesome place to wait for some scared little boy at some minute in some hour during some dark night....

Like the evil thing in the lonesome place, the "beastie" has been generated by the innate evil within the boys; they have at first displaced this darkness within them as a "bogey-man" who is on the mountain. And, then, as in Derleth's story, this evil becomes manifest and murder is committed. Indeed, as the Lord of the Flies tells Simon, "I'm part of you." 

The beast represents two things, I think. First, the beast symbolizes the boys' fears. These fears are a combination of childish fears of dark places and more "mature" fears of the unknown.

The beast also represents the dark side of the boys' natures. They can become that which they fear - and they do. They are capable of losing their identities and becoming savage, brute creatures. The beast is a metaphorical incorporation of these potentials. 

In Chapter Eight, "Gift for the Darkness," the Lord of the Flies reveals the true nature of the beast:

"Fancy thinking the Beast was something you could hunt and kill! [...] You knew, didn't you? I'm part of you? Close, close, close! I'm the reason why it's no go? Why things are what they are?" (143)

The beast comes to represent "mankind's essential illness" in Lord of the Flies.  Basically, Golding uses the beast as a metaphor for the fact that man cannot remain good or pure, no matter how hard he may try; man is predisposed to being evil.  The boys revert to savagery because without the constraints of civilization, human nature is naturally inclined to violence and barbarism. 

The beast is not real.  It represents the children's fears about themselves.  Metaphorically, the beast is the savagery hiding within them.  When they "kill the beast" they are really igniting it.  The beast is the dark part within all of us.  Once alone on the island, they eventually let it out.