It’s an undead baby dragon, produced by a failed magical spell. It probably would be cute if it weren’t partially decayed.

Young dragons are relatively defenseless. They are born with relatively soft scales, which are shed and replaced with harder ones as the hatchling matures. Once a hatchling’s wings grow in, it typically marks the beginning of maturation. At this point they are often capable of hunting on their own and are usually left alone by their mother.

Undead Two-head shambles around, targeting every dragon that's too slow to evade it, which is exactly zero dragons. Some think it's a "she", but nobody's willing to get close to the little horror to check. A lot of its soft bits appear to have rotted, so it probably isn't possible to tell, anyway. It doesn't mind what gender others call it and focuses on more important matters, such as shambling around. People figure that Undead Two-head, being a duotone and all, must've been unable to decide whether to come back to life or stay dead, so it chose something in between.