They are wild wolf-like humanoid shapeshifters, a human subspecies or a class nine hyper-accelerated protean (HAP) life form.
The first mention of werewolves in the series was by Ashley Magnus. When being treated by Magnus for shoulder stitches, Ashley becomes a little too chatty towards WIll, against her mother's wishes since he is still a guest at the moment. Ashley said that in the summer she turned 18, her mother, a group of a few nervous locals (including one who seriously looked like Adrien Brody), and herself drew an entire den of werewolves for research cataloging. As she continued to blather and recount the mission, Ashley mentions being low on silver bullets and the Full Moon was on the rise before being cut off by Will, accusing her of making up the story. However, later in the series it is not confirmed that silver hurts werewolves or that phases of the Moon affect werewolf transformations. 
Similar to vampires, the werewolf species has been hunted by humans almost to the point of extinction. Only small pockets of the species remain in the world.
In 2010, Henry and Will headed to England after reports of werewolf sightings in a small village. Investigating the area, they discovered evidence that pointed to a mental institution. Henry, eager to meet another of his kind, wanted the Sanctuary to investigate, but since the clinic was private, they could not gain permission or force their way in.
Henry decides to go in under cover as a patient, and is put through a battery of strange tests by the suspicious staff. Henry eventually learns that everyone in the mental institute is a lycan, members of an extended clan. After being persecuted for so long, they built the institute as their own personal Sanctuary. Since it is a mental institution, any strange behaviour would just be put down to the patients' supposed illnesses, so they have been left alone for years.
Unfortunately, Henry learned that years of persecution had taken its toll on the clan, all of whom now lived in fear of themselves. Using pills to keep the wolf side suppressed, they were essentially prisoners of their own safe haven. The elders of the clan kept order by tailoring the drug to turn the user aggressive if they go off the meds, therefore discouraging anyone from attempting it. They had even forgotten that is possible to control themselves when transformed, as many now believe when they transform they are mindless beasts.
Henry was eventually drugged by the clan leader to use as an example to the others, since Henry has caused them to start questioning their way of life. The drugs force him into his wolf form and induce a berserker state, and he begins chasing Will who found his way into the insititute. Fortunately, Will was saved by one of the clan members who secretly went off the drug and learnt how to control herself. She fought Henry long enough for the drugs to work out of his system.
In Season 4 it is revealed there are fears that the werewolf species is slowly dying out due to the lack of newborns. When Erika falls pregnant, Magnus discovers that the drugs that she and the clan were using to suppress their transformation also lowered their fertility rate. Now that she has come off the drugs, the chances of pregnancy have improved, though it is risky: her body is creating extra hormones as a defence after taking the medication for so long, something her body has trouble dealing with. Magnus suggests a procedure that will slow the embryo's growth, so that the hormones are released at a slower rate. The baby will be the first HAP to be born since Erika.
A female lycan's body will normally go into 'lockdown' (unable to shift) to protect the fetus, because the transformation also changes a lycan's internal organs. The natural gestation period is ten and a half months, slightly longer than a human.
Notes and References Edit
- Detailed article about werewolves on Wikipedia