Selden is the “Notting Hill Murderer,” an escaped convict and Mrs. Barrymore’s brother.
Watson learns that there is a killer on the loose on the Moor. Mortimer and Henry Baskerville discuss the issue. There is a reward of five pounds for his capture, but he is so dangerous that even that does not seem worth it.
Holmes had taken an interest [in the case] on account of the peculiar ferocity of the crime and the wanton brutality which had marked all the actions of the assassin. The commutation of his death sentence had been due to some doubts as to his complete sanity, so atrocious was his conduct. (Ch. 6)
Watson is a little nervous about this “fiendish man” hiding out in the moor. It would be very hard to find an escaped criminal in the desolate landscape. This adds even more suspense and danger to the problem of someone targeting the Baskervilles and the spectral hound.
While he is staying at Baskerville Hall, Watson notices that the Barrymores are acting strangely. He sees them up at night at a window. He realizes that they are using a candle to signal someone. Thinking this is related to the plot against Sir Henry, he confronts them. Mrs. Barrymore assures him that the candle is not related.
“My unhappy brother is starving on the moor. We cannot let him perish at our very gates. The light is a signal to him that food is ready for him, and his light out yonder is to show the spot to which to bring it.”
“Then your brother is—”
“The escaped convict, sir—Selden, the criminal.” (Ch. 7)
According to Mrs. Barrymore, her brother really isn't that bad. He just fell in with a bad crowd. It turns out that Selden was a red herring, or a false clue. He has nothing to do with the Baskervilles other than the fact that his sister is employed there. She feels sorry for him and is helping him.