The character Ermac actually originated as a glitch from the original Mortal Kombat arcade game. If you unlocked the secret battle with Reptile, on rare occasions the game would experience a glitch, resulting in Reptile's pallete changing from green to redish orange, and his name text changing to "ER MAC" ("error macro"). After this was discovered by gamers, the producers decided to officially make "Ermac" a character.
Rain was never an official character in the arcade version of the game. He was originally just meant to generate rumors among fans who spotted him in the demo sequence, but he was added as a playable character for the home versions.
The characters Sub-Zero (masked), Scorpion, Reptile, Rain, Ermac and human Smoke (unlockable) all share a character sprite. The only changes are in color palletes and, obviously, moves.
Cyrax can be seen in the desert background, trapped in the sands - a reference to his ending from MK3.