Cell is the ultimate creation of Dr. Gero, designed to have all the abilities of the greatest fighters to have ever inhabited or visited Earth, the result is a "perfect warrior", possessing numerous favorasble genetic traits and special abilities.
Cell's original, larval form floats in Dr. Gero's basement laboratory. Cell grows to full-size, cracks out of the machine, turns from a larva into its imperfect form, kills Trunks in order to steal his Time Machine, reverts to his larval form, and travels back to the present timeline in order to absorb Androids 17 and 18. In his Cocoon Form, he burrows deep into the ground where he remains for four years, during which time he undergoes a slow, natural evolutionary process as he prepares to change into his imperfect form. Once ready, Cell emerges from the ground to shed his skin. This form's effectiveness in combat (if it has any) is never shown, although it is possible it has some level of defensive capabilities, as being a "perfect" being, it would have some way of defending itself.