Most of Lady Mio's history is unclear, and the girl's very existence is never revealed or even mentioned until the end of the game. What is known is that Mio was born, along with Raem, from the meteor impact that destroyed the Great Crystal and gave rise to the miasma produced by the Meteor Parasite. Both entities are apparently dependent on the memories of living beings for sustenance.
However, their individual palates diverge quite significantly. Mio desires simply to "nibble on memories from time to time", leading to forgetfulness, while Raem consumes all the memories which he perceives, thereby eradicating all coherent thought and recollection.
The Tipa Caravanners meets her for the first time after their battle against the Meteor Parasite. Once defeated, the Meteor Parasite withers and lies weakly on the ground, waiting for someone to finish it off. Before the Caravanners can administer the final blow, a disembodied voice commands that they stop and a white light from the Crystal Chalice flashes, taking them to the Nest of Memories. This event is probably caused by Raem.
Once there, the history and nature of Raem is revealed by Lady Mio, as is the fact that both Leon and Hurdy were victims of the being's insatiable appetite for painful memories. However, he was dissatisfied with them, as they spent all their time looking ahead and giving little thought to the past.
While this information is being related, a series of randomly-determined questions pertaining to the Tipa Caravanners journey must be answered in order to progress. An incorrect response will cause the Caravanner to lose a memory, and will summon a pair of Raem's Minions. The game is over if their memory total is reduced to 10 or less.
Once all the questions are answered, Lady Mio opens a door, through which the Tipa Caravanners enter into a new area, which seems to be a force field high upon the Nest of Memories. Misleadingly, this area can be misunderstood as an area in the space high above the real world.
In this moment Raem descends. He and Mio begin a discussion of the whys- and why-nots of consuming memories. As soon as Mio shatters the force field to rescue the player of the avaricious Raem, however, this facade quickly drops to reveal a brutal thug, using his immense power to pin her to the floor. Thus begins the final battle against Raem.
Once defeated, Raem refuses to surrender, apparently afraid of fading away. In a desperate attempt to preserve his own existence, Raem uses his powers to both possess and merge with Lady Mio, becoming Memiroa, or just "Mio-Raem" ("Memiroa" is an anagram of "Mio" and "Raem").
Once Memiroa is defeated, it shatters into thousands of shards and the voices of Mio tells the Tipa Caravanners that the two will sleep for a while. Then the Tipa Caravanners are teleported back into the cave of the Meteor Parasite, which needs one final hit to kill it.