Peg was said to be a servant girl at Waddow Hall, who was sent out to fetch water on a winter's night. She was forced to go despite her protests that she was afraid of falling - and promptly either slipped on the ice and broke her neck, or fell in the river and drowned. Afterwards, any accidents in the area were blamed on her vengeful spirit.
Another version of the story from the 1860s (Harland and Wilkinson's Lancashire Folk-Lore) describes the spirit as male and of unknown origin. According to Westwood and Simpson both versions of the legend appear in the book, which could indicate two separate pieces of folklore becoming conflated, or perhaps with Peg "taking over" from an older story. The inclusion of the well may have been because of a headless statue beside it, which may be that of a Catholic Saint damaged in the Reformation.
Both versions of the story include that one night every seven years the spirit would claim a human life by drowning, but could be fooled if an animal were deliberately drowned instead.