The Scarecrow's Role in the Game
Before turning to a life of crime, Dr. Jonathan Crane was a psychologist with an interest in studying the element of fear in humans. After performing inhumane experiments on unwilling subjects, Dr. Crane decided to turn his interests toward inducing fear and hallucinations in subjects under the guise of "The Scarecrow." Through the use of a specially developed hallucinogenic gas, the Scarecrow attacks Batman throughout the game, transporting the player into a drug-induced nightmare realm in which he stalks Batman through a physics-defying maze.
Venom and Titan
One subplot of the game revolves around the substance that gives the super-villain Bane his increased stamina and strength. Numerous characters, including the Joker, are seen using this substance to transform their bodies into "meta-human" monstrosities. The Scarecrow pursues Batman as he searches for a cure for Titan, the drug that the Joker plans to use to create monstrous and unstoppable henchmen.
The Scarecrow's Demise at the Hands of Killer Croc
As Batman pursues Poison Ivy to discover an antidote for Titan, he learns that the Scarecrow plans to release his hallucination drug into Gotham City's water supply by way of the Arkham Asylum sewers. Unbeknownst to the Scarecrow, the security team has imprisoned Killer Croc in the Arkham Asylym sewers. After a brief run-in with Batman, the Scarecrow is ensnared by Killer Croc and pulled underwater where it can be assumed that he meets his demise.
Post-Credits Scene
After defeating the Titan-infused Joker and sitting through the game's credits, players are treated to one of three random endings. Each ending features either Bane, Killer Croc or the Scarecrow reaching from the water of the Arkham Asylum sewers with a vial of Titan in his hands. These endings seem to be randomized, and give the impression that, while defeated, none of these villains was killed during his encounter with Batman.