According to the 1991 storybook The Phantom of the Muppet Theater, John Stone is a deceased stage actor who built The Muppet Theatre in 1802. At one time, he performed Hamlet in the theater.
After passing away, he could not bear to leave his theater and began haunting it. He generally stays hidden, unless he sees that he is needed. In The Phantom of the Muppet Theater, he helps a number of the Muppets, most notably saving Gonzo during an act-gone-wrong. Stone admits that he enjoys watching the Muppets' perform their show. In the story, Kermit's office contains a portrait of Stone.
The character's name may be a reference to the Muppets' longtime collaborator Jon Stone.