Legato was recruited by Knives after the July incident to make Vash's life a living hell, though the nightmare doesn't really begin until about midway through the series. From that point on, this man continues to weave a living nightmare for Vash, not only on his own but also through the gang of eleven superpowered killers who are under his command: the Gung-Ho Guns.
Legato himself possesses a dark power: the ability to control people's bodies against their will.
His favorite bit of poetic justice is to make gangs of people who oppose him shoot each other, and this special power is what finally forces Vash to cross the line he promised himself he'd never cross. By controlling some villagers and pointing their guns at Meryl and Milly, he forced Vash into a choice between two unacceptable options: either allow the girls to die, or take the only possible action to save them...and kill him.
Legato's telekinetic powers come from the fact that he has Vash's left arm. When Knives shot it off, it was attached to Legato. This is why Legato can control other people's bodies (originally one of Vash's and Knives' powers) and can activate Vash's angel arm the same way Knives did in July.
It is unclear how Vash's arm was transplanted to Legato, since Vash is a humanoid plant and Legato is human. One might think that perhaps Legato is also a humanoid plant, but it is made clear in the series that Legato is human and hates himself because of it. Thus we can only assume that Knives somehow "reconstructed" and modified Legato in some way.
