Lil'thulhu is based on Cthulhu, a malevolent, chaotic cosmic entity created by H.P. Lovecraft.
Created for Robert M. Day, Lil'thulhu brings his chaos to the game by giving the defender a chance at an automatic win.
Remember that his ability takes effect before a defending unit is chosen, so it's basically a free shot at ruining the attacker's plans. He's only useful if he's in a Village, so get him down as soon as possible.