Annie was a creation of Clayface.
When Clayface plunged into the ocean, his already inconsistent form had begun to deteriorate even further. However, when exposed to chemicals leaking into the water from sewage pipes, he was restored. Clayface was weak, though, and uncertain of his location and surroundings. Using his enhanced abilities, he created a spawn in the form of a little girl to scout the area and report back to him. However, the girl forgot her purpose shortly after leaving Clayface's proximity, and left the sewer-system to determine her identity.
After recovering, Clayface pursued the girl, adopting the form of a bulky human male. The child, however, became frightened, thinking she was under some kind of attack. Gotham's night life proved to be no friendlier:One eventful evening, she found herself attacked by gangsters, although Robin managed to save her.
The girl fled, not wanting the help of anyone else, but Robin persisted. Eventually, she warmed up to him and revealed her story. Improvising, Robin gave her the name "Annie" based off a Raggedy Anne doll a nearby child was carrying. The two set off to discover her identity. Clues began connecting, and they quickly found themselves back in the sewer-system, where Annie recovered her complete memory. Clayface had been waiting as well, and urged her to rejoin him.
A struggle ensued, but in the end, Annie chose to save Robin by sacrificing herself. Robin was infuriated, and tried to kill Clayface with a tank of chemicals, demanding him to bring Annie back. Clayface said that he couldn't and that she was gone, and Batman had to restrain Robin. Clayface attacked the catwalk that he and the Dynamic Duo were standing on as the sewer system was about to explode, allowing Batman and Robin to escape as Clayface was knocked unconscious by the explosion. He was eventually apprehended, and amongst his charges, Robin silently listed murder.
Powers and abilities
As a spawn of Clayface, it's likely Annie had similar powers to his. However, the only ability she displayed was absorbing some of Clayface's body clay into her own physical structure.