Demon

"Demon" is the Covenant name for all Spartans , but is most commonly used in reference to John-117. This is primarily due to the fact that the Covenant fear the Spartans, because of their ability to destroy hundreds or thousands of Covenant soldiers. They particularly fear John-117 because of his destruction of Installation 04, and other Forerunner artifacts. Because they treat these as relics and the Forerunners as gods, it is possible they see John-117 as the opposite, a demon.

Demon could possibly mean a particularly powerful foe, and they might call Spartans "demons" because they rarely ever die, comparing to a demon's immortality and are bringers of great destruction and defeat (John-117 and Installation 04). This is supported in Halo 3: ODST where enemy Unggoy refer to the player, who plays as an ODST, as a "demon". Also, a demon's immortality could be part of the UNSC myth of how Spartans never die, they only go MIA or WIA.

Gameplay
In gameplay, when Covenant warriors encounter John-117 in combat and sight, they usually engage him with extreme caution. Unggoy and Kig-yar have a tendency to retreat upon the Demon killing their Sangheili or Jiralhanae commander, or if they are the only soldier remaining. The San 'Shyuum and Jiralhanae also refer to John-117 as the Demon. The Prophet of Truth is the only member of the Covenant that has referred to John-117 by his alternate name of Master Chief. It is theorized that Truth says this so the player knows who the demon is, as the term is not used in Halo: Combat Evolved.(however in Halo CE enemies will refer to you as "devil", like upon your death Unggoy will say things like "dead devil")

If any Covenant soldier actually kills a Demon, it may be assumed they are given a very high reward for their success against this potent and dangerous adversary. This can be noted in gameplay during Halo: Combat Evolved when John-117 dies, the nearby Unggoy laugh crazily or shout "I did it! I'm the one!" and similar things. Also the nearby Sangheili laugh. In Halo 2 when John-117 dies, the nearby Sangheili say something along the lines of "The Demon is dead, I killed it! I killed the Demon!"; "The Prophets shall reward me well for that!"; "The Demon is dead! By my hand!"; "I have earned my Journey!"; or more rarely, "Ha! And I'm not even the Arbiter!". Unggoy can sometimes be overheard after John-117 dies exclaiming "I get his helmet!".

When the player throws a grenade, a Sangheili (and sometimes an Unggoy) in Halo 2 will usually say "Demon Flare! Scatter!", regardless of the grenade type.

Halo 3
While fighting alongside your allied Sangheili, mostly Sangheili Majors and Spec Ops Sangheili they will call you Demon, perhaps out of respect and deference or to signify your rank as a Spartan. Later in the game, the Sangheili begin clarifying and referring to you as Spartan, or sometimes, Human Champion; if you were to be killed anytime during gameplay, and the Sangheili witness this, one of them might say "The Human Champion is down!" The theory that "Demon" translates into "Spartan" is disproved in this game when Rtas 'Vadum and Thel 'Vadam refers to you as "Spartan" after destroying a Scarab on The Ark. Thel 'Vadam, Minor Sangheili and some Spec Ops Sangheili will sometimes refer John-117 as "Reclaimer", just like 343 Guilty Spark. This is most likely as a result of the new Human-Sangheili alliance, which makes the derogatory term Demon inappropriate. Thel 'Vadam has probably taken the term from 343 Guilty Spark, who always refers to John-117 as Reclaimer. Like Rtas 'Vadum, however, he will usually simply refer to John-117 as Spartan. For example, when Johnson is killed by 343 Guilty Spark, he says "I am sorry Spartan." If you die at the hands of Covenant soldiers like Jiralhanae and Unggoy, they will say things like "The Demon is dead!", "We are the Champions!" or on rare occasions, might say things like "I got the Demon's boots!", or "I call his helmet!". Often, one will shout (IWHBYD Skull off) "Ding-dong the Demon's dead!", "Who's dead now? Not me! Ha ha ha!"