It's a combination of a number of things.
Part of it is Bono's 'Fat Elvis' period - symbolising the excess of rock and roll.
Another side of the character grew out of the 'Mirrorball Man' character of the first US leg of the ZooTV tour - the Mirrorball Man was more of a satire on Televangelists, Bono decided to change the character for the European leg.
Part of it is Bono taking the piss out of rock and roll in general and the media's perception of it.
And part of it is a representation of the devil himself - interesting in this context that the MacPhisto character was killed off at the end of the HMTMKMKM video, with C.S. Lewis's the Screwtape Letter's depicted in the last frame.