Dry Bones is the second koopa to ever exist. After Bowser, he is the oldest koopa ever. As he is so old, he has since turned to bones, and is now undead. This makes him impossible to kill, so he is now one of the most frustrating enemies in all of the Mario shames.
Dry Bones was created by Bowser about 1000 BC. Bowser brainwashed him, and made him the first koopa troopa. Dry Bones fought loyally (and brainwashed) for a thousand years. But the fighting was so rough for him, he slowly started to wear away until he was nothing more than a skeleton. This is the Dry Bones we know today.
After realizing Dry Bones' age made him immortal, Bowser started aging other koopas. However, this just made them grow white beards and then turn to dust. So, Bowser decided just to clone Dry Bones instead. There are now hundreds of Dry Bones running around the UnWorld.