Nathaniel is an interesting creature. He can take whatever form he pleases, and he wields a fairly excessive amount of power. Of course, Nathaniel only wields as much power as Jack allows. This is true for every being in Jack's world (with a few exceptions, of course [i.e. the Archon]). Nathaniel is many things to Jack: protector, servant, friend, and mentor among others. Nathaniel gives all that he can to his master. Not only does he give his service, but he also gives his wisdom and his company as Jack requires them.
Nathaniel sees many things in Jack that Jack would not normally see in himself. In many ways, Nathaniel completes Jack. What exactly is Nathaniel, then? He is a manifestation of all the good aspects of Jack. Not all of these aspects show themselves in Jack, but they are there nonetheless. They are easier to spot in Nathaniel, as he is a manifestation of good, capable of no evil.
Nathaniel was created from a moment in time where Jack received great inspiration about his own future. This event can be called The Awakening. Previous to this, Jack had no conscious insight about himself or what he wanted from life. When Jack became aware of what he wanted from life, he began a journey which has taken him through years of travel and exploration. Nathaniel came into being to assist Jack through his quests and obstacles, though Jack did not develop a deep relationship with Nathaniel until much later.
Nathaniel is not a simple, single being. He is the ideal embodiment of the philosophy and ideology which guides Jack. When Jack is blinded by his own demons, Nathaniel is there to remind him where he needs to be and what he needs to do.
Nathaniel shares Jack's desires and goals, but he is more patient and understanding about them. He understands that things take time, and not everything is as it seems. Jack understands these things too, but not on the same level. Nathaniel is the purest form of good which is found within Jack.
At times, Jack becomes extremely frustrated with Nathaniel. At such times, he banishes his servant from the court, thus allowing for more sinister forces to find their way into Jack's life. Nathaniel will not return unless Jack summons him, and this is something that can be potentially dangerous to Jack's well-being. Without the will to summon Nathaniel, Jack could very easily be led down a path of self-destruction.
Nathaniel was Jack's greatest comfort when the Lady of the Garden jilted him. Since then, the bond between the two has become almost unbreakable.