Ermac does not appear in the original Mortal Kombat. He appears in the game’s diagnostic error counter — a debug display that showed ERMAC (error macro count) on certain arcade board tests. Players who saw this display before it cleared assumed they had spotted a hidden character named Ermac.
The rumour spread through arcade culture, pre-internet, entirely by word of mouth. A secret red ninja who was hidden deeper than Reptile, impossible to unlock through known means. Because there was no way to definitively disprove a rumour in 1992, Ermac persisted for years as a genuine unsolved mystery.
Midway noticed. When Mortal Kombat 3 was in development, they named an actual character Ermac — canonising a character who had never existed into the game’s mythology. Ermac appeared in the story, had a full moveset, and eventually received a detailed origin story across multiple games.
The Ermac phenomenon is the earliest and most complete example of player myth-making that a game developer adopted as canon. A debug display became a character became a major storyline over thirty years.

I’ve put 200 hours into this game and never caught this. The developers really reward the obsessive players.
Currently on my first run and now I have to go back and look for this. Worth the detour.