From Blood on the Clocktower Wiki
Fabled characters are for the Storyteller. They each alter the conditions of the game somewhat and are usually included at the beginning of the game.
The purpose of a Fabled character is to allow players to join in a game of Clocktower when they would otherwise not be able to, or to allow a game to run smoothly when there would otherwise be a real-world issue. Fabled characters fix problems that are outside the usual game parameters.
For example, if a player has a mental disability that would normally mean that they are unable to understand the game rules or communicate with the group, a Fabled character can allow them to join in. If a player is new to the game, and fearful that they will die early, a Fabled character can protect them. If there are too many players wanting to play all at once, a Fabled character can make the game run more quickly. If one of the group is shy or softly spoken, and has trouble getting the groups attention, a Fabled character can give them the powers to do so. If the game needs to end unexpectedly early, a Fabled character can decide a winner. If you have made your own character list using the Script character list generator, a Fabled character can help it be more fun.