The Despair Video was created by Junko Enoshima, who had used Ryota Mitarai's animation techniques after manipulating him into sharing them with her. The video contains the events of The Tragedy of Hope's Peak Academy, and the whole tragic event was created for the sake of the Despair Video.
The Despair Video is a recording of the first-ever Mutual Killing Game, which occurred during The Tragedy of Hope's Peak Academy. The video includes special effects meant to subliminally inflict feelings of intense despair on the viewer, including ominous color shifts and an eerie choir in the background. The brainwashing's effect is often portrayed with having the person's eyes turn spirals, which is also used to indicate despair in itself.
While the brainwashed reserve course students and security guards appear visibly off, lacking some emotion and being unusually silent, the Ultimate Despair members often do not appear different from their usual selves. This could be because the video was improved, giving it a stronger impact yet less noticeable effects.
It seems like the brainwashing allows the Ultimate Despair to retain their normal characteristics and views, but turns them very twisted, giving them hunger for despair and undying loyalty for Junko Enoshima. The brainwashed believe they are doing good and often act like their usual selves, making them all the more disturbing. It's been shown that Nagito Komaeda suffered from unusual effects after being brainwashed, having very conflicting feelings about Junko and despair, and overall appearing to be more aware of what is truly happening—it is possible that his luck allowed him to resist the brainwashing's effect a small amount, leaving him in a slightly more lucid yet more painful state. His already twisted beliefs of hope and despair might have also had something to do with this.
Following her meeting with Ryota, Junko learned how certain animation techniques could be used to influence a viewer's state of mind, effectively brainwashing them if used correctly. Realizing how useful this could be for her plans, she analyzed Ryota's in-progress Hope Video to gain an understanding of his techniques.
Following the Tragedy of Hope's Peak Academy, Junko combined footage of the massacre with her newly-gained editing abilities to create the first version of the Despair Video. She sent pieces of her video to the Reserve Course to ignite their anger towards Hope's Peak Academy, beginning The Parade. She also showed the video to Mikan Tsumiki, infecting her with despair until she became an eager servant.
However, Junko soon realized that the Despair Video still required modifications before it could be used to its full potential. As such, she sought out Ryota's assistance once again, only to discover him being accosted by Mikan after finding a file of the Despair Video on his computer. Although Ryota was horrified at the perversion of his life's work - anime being used for despair instead of hope - he had no choice but to continue developing the Despair Video when Junko threatened his friends in Class 77-B.
Protagonist Ryōko Otonashi encountered upon waking up in a strange place an older female student dressed as a maid and wearing a Monokuma helmet, who introduced her to a "secret society" composed of Reserve Course students, who are seen watching the Despair Video inside a secret basement. They all wore similar school uniforms and the same Monokuma helmets, and sat still silently, repeatedly watching the video, one of them mentioning that they had already watched it 5818 times and still kept going.
It's later shown that at least some of the security guards were brainwashed and worked for Ultimate Despair as well.
In Danganronpa Gaiden: Killer Killer Chapter 12, Kazuo Tengan is seen acting in the name of Despair and, most importantly, his eyes are represented as spirals, confirming that he is already brainwashed by the Despair Video and is a member of the Ultimate Despair.
Following the destruction of Hope's Peak Academy, Chisa Yukizome held onto a pair of flash drives; one contained the Despair Video, while the other contained the Suicide Video. She eventually gave the drives to Kazuo, suggesting that they could undo the damage of the videos by finding Ryota in the despair-ruined world and employing him in the Future Foundation. Kazuo asked if Chisa had watched the Despair Video herself, which she denied.
After the Final Killing Game had ended, Ryota resolved to undo the damage his Despair Video had done to the world by using his completed Hope Video to brainwash everyone into being incapable of feeling despair. Although he was stopped by the former Remnants of Despair before he could complete his plan, the brief exposure to his Hope Video seemed to undo the effects of the Despair Video, restoring a semblance of order to the world and putting an end to The Tragedy.
- Danganronpa Gaiden: Killer Killer (Chapter 012, page 31) Tengan confirmed as an Ultimate Despair infiltrator.