From Dragon Ball Encyclopedia, the ''Dragon Ball'' wiki
When Son Goku looked for the Ultra Divine Water, Darkness watched him and Yajirobe fought against Darkness Ice Monster. As they tried to escape it, they fell lower into the chasm. Yajirobe ascended the cave, while Goku descended deeper. Goku then found Darkness in the form of Muten Roshi. He took Goku to what appeared to be Kame House. In the form of Bulma Brief, Lunch, Oolong, Puar, and Yamucha, he tried to convince Goku to remain with him forever. Not realizing the deception, Goku called them all cowards and attempted to leave. Darkness, in the guise of Muten Roshi, told Goku that he could not get the water and he would have to kill Goku. They fought but were interrupted by Yajirobe falling from above.
Yajirobe and Goku then fell into a chasm, with Goku barely saving his friend and himself. Darkness told Goku to just let go, but Goku refused even when Darkness started beating him. Eventually, Darkness knocked them down but also saved them. He decided that Goku was worthy of drinking the Ultra Divine Water, but warned Goku of its power. When Goku succeded in drinking the water, Darkness sank into the lake never to be seen again.
Darkness had the power to take on the likeness and powers of anyone, but choose people close to his next victim presumably by some form of Telepathy. He also seemed to be able to use the Magic Materialization technique since he was able to make a replica of Kame House. There is also the possibility that they were just illusions, and Darkness merely toyed with the minds of his victims, killing them using his mental powers.