They were placed in the Sirius Sector by the Dom'Kavash, to take care of the Sector and repel invaders. While they wield sophisticated weaponry that requires no energy to fire, their ships lack any kind of shielding. As such, they have relied upon their ability to possess humans to attempt to divide the colonies against each other until humanity's forces were weak enough to be mopped up by Nomad technology. The Order, using captured Nomad crystals, has kept this threat in check.
Nomads themselves are bluish in coloration and feature a snake-like mouth that is used to possess others by entering through the mouths of their victims. A sure sign of Nomad possession is one's eyes turning purple. There is no known way to reverse Nomad possession, and many view termination to be the only cure for a victim of the Nomad threat. However, at the end of the Single Player Plot, after defeating Nomads in a battle within their homeworld we find all the people possesed earlier by Nomads totally uncontaminated.
The Nomad parasite itself appears to be larger or the same size as a human. Because of the fact that the Nomad physically resides inside a human body, a Nomad parasite must be able to stretch and compress its own body significantly.
Nomad spaceships are apparently grown organically, or at least assembled of organically grown parts. Their ships come in the same pastel blues as the Nomads themselves, suggesting a similar biology. Their weapons seem to have self-contained power sources (probably also biological), which explains why Nomad Lasers could be be fitted onto the corrupt Liberty forces' Defenders, and why Nomad Energy Blasters and Cannons can be fitted on your own ship. Oddly, the Nomad's permanent structures (the Nomad Jumpgate and Lair in particular) appear to be made of a gray-green stony material instead. Perhaps these are actually old Dom'Kavosh architecture, and not the Nomads' own work at all.
The Nomads first began to move against humanity two months before the destruction of Freeport 7, when Rheinland explorers landed on the planet of the Omicron Major system. (This is the same planet that you fly past during the assault on the Dyson Sphere; when the explorers visited, the Sphere was hidden from view by a nebula). As per their programming, the Nomads immediately began making preparations to exterminate these intruders in the Masters' domain. They possessed the explorers and used them as a springboard to begin infiltrating the Rheinland government. Early on, a Nomad came to Liberty and infected the CO of a soldier named Orillion, prompting him to escape and establish the Order.
In an early deleted Epilogue clip that was made while Freelancer was still in development, the Nomads are displayed to have arrived in Earth's solar system shortly after the 5 Alliance sleeper ships departed for Sirius, and, with a massive spaceship the size of a moon, fired an energy burst into Earth's sun that made it go supernova and destroy nearly the entire system, with no survivors except for an Alliance military officer named Attickus Rockford, who survived the shockwave on the dark side of Pluto, the Alliance's final base. Since humans are not displayed to have inhabited any other solar system in Freelancer besides Earth's at that time, the 5 sleeper ships containing Alliance human races would have been the only surviving members of humanity left after the Nomad's genocide of all Coalition races. However, this information is not officially considered canon.