Demon Chi

When the Demon Sorcerers were banished by the Eight Immortals, traces of the demon's chi was left in the items used by the Immortals. So when the bad Chi stars aligned, the Items used by the Eight Immortals activated, and the User would become imbued with the power of the respective demon sealed away.

This encouraged Drago, the son of Shendu, to break out of Section 13 and find the Immortal Items to absorb the powers of his demon aunts and uncles. After breaking free, Drago recruited Ratso, Finn, and Chow for the first chi, the wind demon, by giving a portion of his own fire chi. Because they were defeated by the wind-powered Jade they got fired. The rest of the series, he recruited Strikemaster Ice's gang, giving another portion of his demon chi to them. When demon chi is absorbed, the host slowly transforms into the demon itself but leaving minor changes, this is explained when Jade absorbed the wind chi and Larry who is almost completely transformed into Dai Gui. Later in the final episode, Drago manages to absorb all 7 demon chi's thus making them unremovable. He gives his henchmen another 'taste' of demon chi, wind,earth and thunder. When Tohru and Uncle seal Drago and the released talisman-powered Shendu into the netherworld all chis and talismans are locked away forever.

Dai Gui, Demon of Earth
Immortal Item: Flower
Chi Absorbed by: Jackie, later Larry, ultimately Drago then Strikemaster Ice

Tchang Zu, Demon of Thunder
Immortal Item: Castonets
Chi Absorbed by: Drago

Po Kong, Demon of the Mountain
Immortal Item: Drum
Chi Absorbed by: Tohru, ultimately Drago

Xiao Fung, Demon of Wind
Immortal Item: Fan
Chi Absorbed by: Jade, ultimately Drago

Tso Lan, Demon of the Moon
Immortal Item: Lotus
Chi Absorbed by: A Panda, ultimately Drago

Bai Tza, Demon of Water
Immortal Item: Gourd Chi Absorbed by: Drago

Hsi Wu, Demon of the Sky
Immortal Item: Flute
Chi Absorbed by: Ms. Hartman, ultimately Drago

Speculations

Because Shendu was also sealed into the Demon Netherworld, it can be assumed that some of Shendu's Chi was also sealed. Why Drago did not pursue his father's Chi is guessed because Drago already possessed Fire demon Chi.

Also, since the Heroes re-sealed the Demons, it can be assumed that the artifacts the Heroes used also contains Demon Chi; but just hasn't been activated yet.