In the 1940s, Amanda Krueger, a nun going by the name of Sister Mary Helena, was a common volunteer at the hospital. Before the Christmas holiday, two hospital guards in a rush to get home accidentally locked Amanda in an upper floor of the asylum's predominant tower...along with hundreds of mentally unstable inmates. As a result, she was repeatedly attacked and raped by the patients. Days later, she was found barely alive, and brought to a hospital. She was impregnated by the hundred patients and gave birth to one child, Freddy Krueger. Shortly after his birth, Freddy was put up for adoption and taken in by an abusive alcoholic (who was also partially responsible for the influenced evil of Freddy).
After Freddy was burned to death by the parents of Springwood for killing their kids, Amanda Krueger hung herself.
Amanda Krueger was often found in the Asylum in many people's dreams, including A Nightmare on Elm Street 3: Dream Warriors (which was also where Amanda Krueger was first introduced), and A Nightmare on Elm Street 5: The Dream Child.
In Freddy vs. Jason, Mark Davis and Will Rollins, two teenagers of Springwood who knew about the existence of Freddy Krueger, were placed in the Asylum and required to take Hypnocil, a drug that suppresses dreams, which kept them safe from Freddy Krueger, until they escaped, and stopped taking the drug (which also led to Mark Davis' death).