An empire (now dissolved) that once spanned a bigger part of the Disc including Überwald, Borogravia, Mouldavia and Zlobenia (according to Night Watch) and was ruled by a Sourcerer known as the Evil Emperor, who was, well, evil. Under the Evil Empire, all sorts of nasty things were created and used in war. As John Hicks puts it in Unseen Academicals, "you got what it said on the Iron Maiden".
It was mentioned under the names Unholy Empire and the Dark Empire in the earlier books, and first described in detail in Unseen Academicals. Later revealed that to its citizens it was known as the Überwald Sorcerous Republic.
Its symbol is a double-headed bat.
See here for more.
It is an allusion to the Soviet Union (confirmed by Terry) with elements of standard fantasy Dark Empires, like Tolkien's Mordor.
In the mid-1980s, during a tense period of the Cold War, American president Ronald Reagan famously described the Soviet Russian-headed Warsaw Pact of nations as "the Evil Empire". Some unkind speculators wondered if the title had been provoked by Ronnie's latest viewing of "Star Wars", or by his flirtation with evangelical Christianity in which godless Communism was always equated with the Antichrist.
The title Unholy Empire may allude to the Holy Roman Empire. The HRE was one of many Central and Eastern European countries (the Roundworld counterparts of Überwald and nearby lands) that used a double-headed eagle charge.
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