Josiah is the resurrected spirit of a preacher child who had been fed hormone stunting drugs by his fellow preachers to keep him young in the old days. When word got out of this, the preachers abandoned him and the townspeople burned Josiah alive. He has risen from the dead to exact vengeance on the townspeople, enlisting the help of the local children through possession, who all assume the identities of children in the town's history who have been long dead. The children's blood and teeth begin to decay as well, and they suffer from extreme seizures and fevers. As the film progresses, several of the town's adults are murdered in horrific ways by the children.
It is revealed in the end that Grace is actually Margaret's mother, not older sister. She had abandoned her as she was too young to be a mother, and began posing as her sister instead when she went off to medical school. This lie gave Josiah the power he needed to be resurrected and exact his vengeance, as he has found another child who had been abandoned and lied to.
Grace discovers that Josiah's weakness is mercury. At the barn where the children gather for a blood ritual in the name of Josiah, Grace along with Donald (who's son Marcus is a hemophiliac and is about to cut his hand in the ritual) rig up a supply of mercury to the barn's sprinkler system. This severely weakens Josiah, giving Grace the opportunity to kill him with a shotgun. Immediately after his death, all of the children return to normal.
The film ends with Grace and her family deciding to leave the town for good.