Lal was an android, constructed by Data in 2366 with a newly-developed submicron matrix transfer technology. Using his own positronic brain as a template, Data created Lal for two purposes – to attempt to re-create the work of his "father", Noonian Soong; and to experience the act of procreation, and of having a family. Data chose the name for his offspring from the Hindi word meaning "beloved".
Originally genderless and possessing a very basic humanoid appearance, Lal was allowed to choose its own gender and appearance. After narrowing the choices to four – an Andorian female, a Klingon male, and a Human male and female – Lal chose the Human female form. Data wanted her to learn about "being Human", and entered her in the ship's school. Unfortunately, other children were afraid of her. As a result, Data decided that allowing Lal to work in Ten Forward would give her more valuable insight into human social interaction. Unexpectedly, Lal began to improve on her father's original specifications, soon becoming able to use verbal contractions and even, eventually, to feel emotions.
However, Starfleet was interested in separating Lal from her father for purposes of study, and when she was only a few weeks old, Admiral Anthony Haftel ordered Data to transfer Lal to the Daystrom Institute annex on Galor IV. According to the Admiral, she was capable of more than 60 trillion calculations per second.
The situation caused Lal distress, and while speaking with Deanna Troi, she began to feel emotional anxiety. Upon running diagnostics, Data identified the problem as a symptom of a cascade failure in her neural net, and, with the assistance of Admiral Haftel, attempted to repair the damage. Despite their best efforts, the effect was irreparable, and Lal's neural net failed, causing her to shut down permanently. As a final act, Data transferred Lal's memories and experiences into his own brain, ensuring a part of her would live on. (TNG: "The Offspring")
Ironically, the symptoms of Lal's shutdown achieved something Data had been trying to achieve for many years: basic Human emotions. It would be five more years before Data would achieve the same results in himself, and this he only did with a new chip from his "father". He, too, suffered from a neural net failure, but recovered and was able to function normally afterwards, even able to toggle the ability to feel emotion on and off at will. (TNG: "Brothers"; Star Trek Generations)
Understandably, Lal remained in Data's thoughts for many years after. During his experimentation with painting, Data painted a portrait of Lal, which he later showed to Juliana Tainer- essentially, Lal's 'grandmother'- when she visited the USS Enterprise-D in 2370. (TNG: "Inheritance")
Lal's potential bodies
In the short story "The Embrace of Cold Architects" by David R. George III (collected in the Star Trek: Myriad Universes anthology Shattered Light), Lal's creation was delayed after Data missed a vital scientific conference until the return of the Borg, allowing Picard to 'distract' the Borg by focusing on Lal and the long-term implications of her existence after he became Locutus of Borg, allowing Riker time to give the order to destroy his Borg cube and kill Locutus before the Borg could find and adapt to their attack. Lal's subsequent breakdown was then averted by the intervention of Doctor Noonien Soong when he 'summoned' Data to him, Soong's expertise allowing him to repair the damage to Lal's neural net. With the information of how to create stable androids, the Federation began creation of a new race of android soldiers intended to fight the Borg, but Data is able to destroy their prototypes.
In the novel Cold Equations: The Persistence of Memory, it is revealed that Lal's remains are kept at the Daystrom Institute, along with the remains of her 'uncles'; Soong's three original prototypes, B-4, and Lore. She is briefly stolen by the Breen, but is recovered thanks to the Enterprise-E and Doctor Soong- still alive after transferring his mind into an android body-, who subsequently manages to restore Data. Data then resolves to find the mysterious immortal known as Flint- based on reports that Flint was responsible for reactivating Juliana Tainer after her positronic net shut down, hoping that Flint will be able to help him restore his daughter.