The Caleuche is not just a simple ghost ship like the European Flying Dutchman; it is a living entity, a floating embassy of witches and a deadly trap for the unwary. Its name, which comes from the Mapudungun language (possibly from 'kalewtun', transform, and 'che', people), gives us the first clue to its nature: it is the ship of transformed people, those who have stopped being human to become something more.

It is described as an old sailboat of beautiful craftsmanship, which appears suddenly among the thick fog of the canals. But unlike normal ships, the Caleuche always sails illuminated, shining with its own intense light that defies the darkness of the southern night. From its deck emanates festive music, laughter, accordion sounds, and the commotion of a perpetual celebration. However, this joy is a macabre facade. The crew is composed of the 'Caleuchanos', powerful witches and, according to tradition, by those who died drowned and were 'rescued' (or kidnapped) by the ship to serve eternally on it.

The Caleuche is a prodigy of supernatural navigation. It can sail against the wind, dive into the depths like a submarine to visit the underwater palaces of the Millalobo (the king of the sea), and transform at will. If it feels observed by someone who should not see it, the ship turns into a floating log, a rock, or simply dissolves into a cloud of fog. But its crew does not forgive onlookers. Whoever looks at the Caleuche runs the risk of being left with a twisted mouth (a common punishment of Chilote witchcraft) or dying suddenly.

The legend has a fascinating economic and social dimension. In Chiloé, when a merchant or fisherman became rich quickly without apparent explanation, the people would whisper that he had made a pact with the Caleuche. It was said that the ship supplied its partners on land with exclusive goods, treasures, and abundant fish, in exchange for dark favors, silence, or even the delivery of a family member. The Caleuche thus represents the ambivalence of the sea: it is the source of all wealth, but also an abyss that demands payment in human lives and unconfessable secrets.