Before the events of Puppeteer, Captain Gaff was renowned for romancing women, even married ones, and stealing them away. If he was refused them, he would often kidnap them. Soon, it grew to be all too much, and the Moon Goddess eventually cursed him - more specifically, his eyesight. Immediately, all of the beautiful women which surrounded him turned into ugly monsters.
Captain Gaff is first encountered in Act 3 while he is fighting pirates General Pig and General Sheep from his ship, the Jolly Lambham. When the story actually begins, it's revealed that both Generals eventually overtook Gaff's ship and left him inside a barrel. After being freed by Kutaro - and a romantic moment with Ezma Potts - he goes ahead and fights off both the Generals with Kutaro.