The Biolizard was an early version of "Project Shadow", a government project run by Professor Gerald Robotnik that was intended to create an "Ultimate Lifeform" as a first step towards humanity discovering the secret of immortality. Due to the experiments, it later needed a life support system. While the Biolizard was successful in the way that it was could regenerate and restore itself, and could self-reproduce, it was also unruly and dangerous[2]. It was closed down when Gerald, with the aid of the alien Black Doom, produced a more advanced being: Shadow the Hedgehog.
When GUN came to Space Colony ARK in order to put a stop to Gerald Robotniks plans, they found the Biolizard and shut it down. It didn't go without a fight, however, and it destroyed almost the entire group of GUN soldiers.
The Biolizard remained in suspended animation aboard the ARK until Sonic the Hedgehog and his friends came there. After Doctor Eggman successfully achieved the seventh Chaos Emerald and put it into the Eclipse Cannon, a video of Gerald Robotnik was shown on all televisions and an audio version on the radio warning people of the Biolizard and how when the seven Chaos Emeralds came to the ARK, the ARK would plunge into the Earth's atmosphere. As the seven Chaos Emeralds were in place the ARK began to fall. Sonic and Eggman joined forces and tried to pull the ARK into orbit again by using Knuckles' Master Emerald to deactivate the Chaos Emeralds.
However, when Sonic and Knuckles entered the cannon's core, the Biolizard was awoken, determined to keep the ARK on its path to Earth. Later, Amy Rose convinced Shadow to help save the Earth, (Shadow had a flashback about his best friend, Maria Robotnik) and Shadow fought and won against the giant reptile. The Biolizard then used Chaos Control to teleport outside and fuse with the space station itself, becoming the Finalhazard, the final boss of the game. It was destroyed by the combined power of Sonic and Shadow in super form, who then used Chaos Control to place the ARK back into orbit.
The Biolizard fights by spitting dark energy balls, biting, or tailwhipping Shadow. After chasing the hedgehog for some time, the lizard stops and seems to hyperventilate, which is Shadow's chance to grind up a green tube that connects the Biolizard's head to its life support system and attack it. After damaging the system a few times, the Biolizard creates dozens of pink egg-like orbs in the air, and fires them at Shadow. Shadow must then use homing attack on the orbs in order to get into the air and attack the life support system again. Finally, the Biolizard will somehow lift Shadow himself up into the air along with the orbs, and as such he must float towards the life support system while avoiding the orbs in order to defeat the Biolizard.
After transforming into Finalhazard, the Biolizard gains the ability to fire large pink energy beams from its broken life support system, and create similar orbs to the one before, except the new ones are red and the Finalhazard creates hundreds of them to cover himself as a shield. He also fires them at Super Sonic and Super Shadow one at a time. As his life support system has been demolished, the Finalhazard has grown large pink boils all over its body, and Super Sonic and Super Shadow must charge into these boils in order to harm it.