Bob is an unseen character who lived in a hobbit hole-like house in Terrorvale that used to belong to Israphel. He disappeared and nobody has seen him since. His hut has a rather unsettling sign inside saying: Death is only the beginning. This was most likely left behind by the previous occupant, prior to his death or disappearance. It is also possible that Israphel may have killed Bob for living in his old home.
People have theorized that Bob was killed by Israphel and transformed into the Zombie Boss. However, even if the Zombie Boss who did battle with the heroes at Israphel's Castle was indeed a reanimated Bob, the Zombie Boss seen at the Battle of the Breach, on the other hand, had a completely different appearance and was wearing a Templar uniform, suggesting it could have been a completely different person from the first Boss, as theorized on Zombie Boss's page.
During Minecraft - "Shadow of Israphel" Part 35: Lastwatch Hold (Minecon Special!), when Knight Peculier tells his story of his past life, he was seen sleeping in Bob's house without the sign on the wall. He may have been renting the house from Bob.