Warning: This post contains Spoilers on the RWBY Volumes 2 and 3 Finales. Continue at your own risk.
Salem. The "Queen" that has pawns, as Qrow said. At first, we thought the Queen was Cinder, being so powerful. But nope, it's Salem, and Cinder is just one of her many pawns. I suspect Salem is going for each of the maidens to get the ultimate power. Now here's the deal: She already has the Fall Maiden, thanks to Cinder. But Salem herself? Who is she? My answer is: A Grimm Faunus.
Now before you go hating on this and saying she's just the "Grimm Lord", or "Creator of Grimm," yes. She creates Grimm, and I'm agreeing with you here. But she herself is Grimm too. Let me ask this: What is a Faunus, exactly? Faunus, according to the wiki, is "a race of humanoid people in the world of RWBY who possess physical animal traits." But I don't think that's very accurate. A singular Faunus to me, would be "a human who possesses a singular physical trait, and several mental traits of one specific animal." Don't believe me?
Take Blake, for example. She's a Cat Faunus, as we established at the end of Volume 1. Her one physical trait is her cat ears. Her mental? Well we know for certain: She loves Tuna, as seen at Volume 3 Episode 1 (11:11). There's also a term most kids use "scaredy cat." Hence, why she runs away after everything.
How about Sun? He's a monkey, clearly. He has a tail, and he's crazy. Ever seen him in a fight? He just runs out there and attacks. Kinda reckless and cocky. Then again, that could just be his character.
And Adam is a bull. He's got the horns on his head. Though they're not clear, they're there. Go check the Wiki if you don't believe me. His only clear mental trait is the fact that he will charge at everything. In the Black Trailer, he charges at the opportunity to kill the giant machine thing. (4:06) And he charges at Yang when she attacks him in Volume 3 Episode 11 (14:54).
So now how about Salem? She's a Grimm Faunus. Her Physical Attribute is more like many attributes in one. Her entire face is that of a Grimm. Pure white with red markings on it. Although the white part is armor on a Grimm, I think it's safe to say most (if not all) Grimm have that armor. It's gotten to the point where it's a part of most of them. She's got the white part as a part of her now. And notice it's not just on their faces. It's all over them. Her skin is pure white if you pause at 21:42. The visible parts of her skin are white with the red markings (assuming those aren't gloves, even though that would prove my point of armor). And she wears a black cape to show even further that she's related to Grimm. Might I add, her eyes glow when she's thinking of evil? And they're red, similar to that of other Grimm (though those are slightly orange.) And for her mental trait? Oh, she hates humanity. She wants to use all her power to "snuff" out the flame of hope. She wants to watch Ozpin (and the rest of humanity) burn.
And here's just a bit of a stretch. She's a Dragon Grimm Faunus, if you want to get more specific. Since a faunus is based on a single animal, Grimm are a whole species. Birds, dragons, land animals. She creates Grimm, just like the Dragon Grimm does.
The Faunus were sent to live there. All of them. No way of contacting the outside because of the lack of CCT's and Relays. When the revolution went on, they may have built a small civilization. But then they were allowed to leave to a better location like Vale. Salem stayed there, being a Grimm Faunus. She despises all humans, away from all contact. This place was literally a desolate wasteland, as we can see behind her. Nobody would ever want to live there. Hence why Faunus were sent there. The only way she contacts people is with those portal things. You know, the one Raven used to travel to Yang, the one that shows up in the Volume 3 Intro, and the one Cinder used with the glove in Volume 3 Episode 7. It's so simple for people with that power to move around, and to even bring people around. But her full plan? That's for another theory, maybe later on.