Lost Souls are the wandering souls that, their way lost, find their way into the purgatory of Gregory's world. The term can also be used to refer to the world's inhabitants, but not often.
Lost Souls are often visually depicted as a ball of energy or flame, usually blue but there are various other colors. Gregory himself has a pink soul, while James's is orange. Supposedly after wandering enough, they turn into pure energy and can be used to power devices. Gregory Mama consumes souls in order to preserve her youth. The Last Train "Ambition" uses these to power its engine and seemingly all the functions of the train, including the lights.
Lost Souls are the focus of Gregory Horror Show: Soul Collector. The player has to collect twelve of them, each being held by a different resident of Gregory House, and deliver them to Death in their dreams in order to escape from the hotel. While a soul is being carried, damage to the Mental Gauge from a Horror Show is reduced (Or the Mental Gauge gains a large but temporary increase to its maximum capacity until returned, either one has the same effect on the player), and the effect stacks up to three times for a max of three souls held per night, although if the attacking resident was originally carrying the soul you're holding, he/she will take it back.