The short version: Wander is the baddie and he and Dormin are transformed into a baby, starting the same race of horned children that Ico belongs to.
The long version:
Why does Wander become a massive shadow monster?
Killing each Colossus released part of the evil demon’s Dormin essence. As our hero slays each titan his appearance can be seen to gradually deteriorate – his skin becomes paler, his hair darkens and he even begins to protrude small horns before the game’s finale. It’s likely that this change in appearance signals the increasing presence of Dormin within Wander and, when all sixteen Colossi are dead, the demon’s essence is once again whole and completely takes over the tragic warrior.
Who are the men that defeat Dormin?
A group of warriors – presumably members of the same kingdom Wander came from, led by Lord Emon. It is unclear whether Mono (the dead chick) and Emon are related, although this could explain his fevered pursuit of Wander.
So why does Wander turn into a baby then?
As punishment for killing the 16 innocent Colossi that were housing the evil spirit of the demon lord and unleashing said spirit upon the land.
Riiiight… but how does that explain a baby with horns?
The horned infant is most likely an amalgamation of Wander and Dormin, scarred by a deformity, but given a new life in order to give Wander the chance to redeem his evil deeds that were spurned by love and not malice.
OK. I’m on board with the demon child. But what’s the connection to Ico?
The Wander/Dormin baby abomination is the first in the line of cursed horned children seen in Ico and thus is the ancestor of the eponymous hero from the charming adventure. This punishment of deformity, for slaying the gentle giants and unleashing evil on the world, is something Wander’s descendants will seemingly have to carry with them forever.
The short version: Tidus fades away because he was just a memory made by the fayth, but he is made human at the end of FFX-2.
The long version:
Why does Tidus disappear in the game’s finale?
The PS2’s first FF poster boy throws himself into the clouds off the airship, and away from his love Yuna, because he is fading away. This is because he is a mere dream created by the fayth – a race of people who have given their lives willingly to have their souls sealed in statues – to carry on the spirit of his destroyed homeland. After you defeat the final boss, the fayth are able to finally depart and, as a result, the dreams they have created, including Tidus, fade away.
How does he manage to come back after the credits when he’s seen underwater swimming towards the surface?
The post credits scene isn’t actually fully explained until the end of Final Fantasy X-2 and only if you press ‘x’ in the Farplane finale. If you complete the game with the 100% ending Yuna and Tidus have an extra scene, where he reveals the fayth brought him back by gathering up all their thoughts, and that he’s now free to live out his life, as long as the fayth can maintain those thoughts.