The Missing Children Incident is an event that occurred in the Five Nights at Freddy's horror franchise. In this event, five children disappeared in the first version of the defunct restaurant.
According to the newspaper clippings, which are occasionally shown in the East Hall of the restaurant, a man (William Afton, the pizzeria's co-owner) dressed up as one of the restaurant's mascots, and then lured five children into the backroom of the restaurant. There, Afton murdered them, then proceeded to stuff their bodies into the animatronics. The police later seemingly arrested the culprit, but the bodies of the children were never found. As such, William was either released, or the police got the wrong man.
After this incident, many people began to complain of smelling an odor that was emitting from the animatronics, and they also said that the animatronics were leaking blood and mucus around their eyes and mouths. This, alongside the aformentioned murders, may have led to the restaurant's decrease in popularity, and eventual closing.
It is was confirmed that Freddy and his friends are actually possessed by the ghosts of the dead children, vengeful.
We are shown in Five Nights at Freddy's 3 that the spirits of the murdered children got their revenge. Some time after the events of the first game, the animatronics all followed Shadow Freddy, which resulted in Afton destroying the suits.
After the main four were destroyed, one of the spirits, the one of Golden Freddy, shows up to take care of the killer once and for all. While the spirits of the children that inhabited the now destroyed animatronics watched the door, Golden Freddy scared William into the Spring Bonnie suit. As he hid, he mistakenly triggers the springlock mechanism, forcing the recoiled endoskeletal parts back into position, thus crushing Afton until he bled out. The souls went to the afterlife 30 years later.