All that I have learned about fox spirits are from magazine articles as well as stories from my grandparents, so this is by no way an authorative account. Anyone who knows more is welcome to contribute.
Fox spirits occupies the same mythological niche as the faerie in Western mythology. They are beautiful beyond endurance, elusive, powerful, mischievous and vindictive. In Chinese mythology, the human form is the pinnacle of creation. All animals, and sometimes plants seek to achieve human form on their way to immortality. Of these animals, foxes seem to succeed the most. They do this by abosrbing the essence of the moon and the sun. Some folklores maintain that fox achieves this by conducting rites of worhip during full moons. After a few centuries, they will acquire the ability to change into human form.
Most fox spirits in stories are female. They usually appear as extremely beautiful woman. The male fox spirits, rare as they are, appear either as erudite and handsome men or wise old men. You can tell a fox spirit from a human from their tails. Some of them have not quite mastered the human form. While the body looks human enough, the tail remains. They solve the problem by tucking their tail inside their pants. The ones who did master the human shape can be enticed to show their true form by getting them drunk. So if your friend remain human after a good night of drinking, you can believe that he's human. :-) If they are killed, they revert to their original form. It's the women who were dangerous. They usually seek to copulate with human males. They use the sexual act itself to absorb their partner's energy in order to add to their own powers. Such relationships, if prolonged, result in sickness and eventually death for the man. So, if you see a beautiful woman who wants to have sex with you for no reason, watch out!
Most fox spirits are not as brazen as that. The fox spirits ordinary people have experienced are much more elusive. They live in the attics or some deserted room in a large house. You never see them. You know they're there because of the noises they make. The difference between fox spirits noises and ghost noises is, of course, fox spirits make the noises day and night! Sometimes the fox spirits throw things, such as rocks and tiles, into the yard or against the door. You know people aren't responsible for the disturbance because you can't see anybody around the house. When a family is haunted by a fox spirit, they set up a shrine in the abandoned attic. Incense sticks are burned regularly. Sometimes food is also offered. Things usually quiet down after that. Most of the time, the fox spirits leave their landlords alone if the landlords leave them alone. Sometimes, the fox spirits will even take care of any thief or burglar who are foolish to rob such a house.
Pu Sung-Lin said that the belief of fox spirits were limited mainly to northern China. In southern China, the main belief is in a much more malevolent sort of spirit called Wu Tong. I will translate a Wu Tong story later. The spirit in the story "Story of Tseng Shi" may be a Wu Tong. However, the belief of Wu Tong seems to have died away in the south in the last two centuries. My grandparents grew up in Fujian which is defiitely southern China, yet the only spirit they know about is the fox spirit. The malevolent Wu Tong lost the war for the belief of human beings. Will the fox spirits now lose the belief of the human beings as well?
Translated from Liao Tsai Chi Yi, found on Galen Jang's
now-defunct page (available at archive.org's Wayback Machine).
There was a man surnamed Li living in T'sao Chou. He possessed the greatest wealth in town. Behind his mansion, he had an empty lot which was going to waste. One day, an old man came to him and offered to rent the property with one hundred pieces of gold. Li refused on the ground that the lot had no house on it. The old man said "Please accept the money and don't worry about the rest." Li didn't understand, but he accepted the money just to see what would happen. After several days, the old man came to him and said "I already moved in, but we're so busy setting up our new household that we neglected good manners. Today, my children shall prepare a banquet for you, the landlord. We hope you will grace us with your presence." Li went to the lot and, to his surprise,discovered a brand new mansion there. As he entered, he saw that the inside was lavishly decorated and furnished. Jugs of wine lined the walkways and the scents of good tea wafted from the kitchen. As the banquet began, he was toasted by the old man. The wine tasted of the finest vintage. He saw and heard many men, women and children, maybe more than a hundred in total, living in the mansion. He then knew they could not be ordinary human beings, but fox spirits. As he returned from the banquet, he returned with death in his heart. He bought sulfur and other flammable material from the city market and, with the help of his servants, secretly placed them all around the new mansion. When he was finished, he ignited it. The fire blazed and sent black smoke upward toward the heavens like a black and evil mushroom. The smell of burning flesh and the screams of the dying filled the senses. When the fire died, he and his servants went into the wreckage. There they found the charred bodies of hundreds of dead foxes. While he was inspecting the carnage, the old man entered the mansion. The old man's face was contorted with grief and anger. He said "I have never wronged you. I gave you hundreds pieces of gold in good faith. That is not a niggardy amount of money. How can you bury your conscience and slaughter us! I must avenge the cruel deaths of my family." Then the old man left. Li thought the old man would just try some supernatural tricks on his family, such as throwing bricks at his house, but years passed and nothing happened.
Then tens of thousands of bandits gathered in a nearby mountain. The local officials could not gather enough forces to suppress them. Li worried about the safety of his large family as well as his rather large fortune. Then an astrologer who called himself the Old Man of Southern Mountain arrived at the town. The astrologer became famous because he seemed to know everything and everything he predicted came true. Li invited the astrologer to his home and asked his future fortunes. The astrologer stood up from his seat in respect and said "This is the true emperor!" Li was both afraid and astonished. Then he accused the astrologer of lying. The astrologer said "Since ancient times, all the dynasties are founded by emperors who came from common birth. Who among them are born emperor?" Li began to believe him. The astrologer offered to became Li's military advisor and asked him to prepare armor and weapons. Li worried that no one will follow him. The astrologer said "I will go into the mountains and speak for the true emperor. I shall tell them of your grand destiny and the bandits will surely follow you." Li became glad and sent the astrologer along. Li than began to prepare as the astrologer instructed. The astrologer returned a few days later and said "Your great prestige, plus my tongue have convinced all the bandits to follow you." Li looked outside and saw thousands ready to follow him, so he made the astrologer into his chief advisor. He then made a great banner, proclaiming his own imperial status. He then fortified his positions in the mountains and the sound of his name shook the neighboring prefectures. When the prefecture sent an army against, Li's army, the astrologer led the defense and easily destroyed the small government army. The prefecturl magistrate became sorely afraid and asked for help from the principality magistrate. The principality magistrate dispatched a larger and better equipped army. That army went into an ambush prepared by the astrologer and was again destroyed. The prestige of Li became great and his army swelled. He then styled himself the King of Nine Mountains. The astrologer told Li that the army needed horses. He told Li of a caravan transporting imperial horses from the capital. Li ambushed the caravan and took all the horses. His prestige swelled still more and so did his pride. Li now gave the astrologer the title of Lord Protector. As for himself, he believed that he would soon wear the dragon robe. The provincial governor was very alarmed by his robbery of the imperial horses. He received reinforcement from the imperial government. He divided his army into six columns and attacked Tsao Chou. The banner of the imperial army filled the mountain valleys around the King's fortress. The King of Nine Mountains became afraid and asked the astrologer for more advise, but his subordinates could not find the astrologer. The great king looked down on his enemies and said "I never realized how powerful the imperial government is." Soon, his fortress was broken and he was captured. Because he commited the crime of attempted usurpation as well as banditry, Li and his entire family were executed. It was only then he realized that the astrologer was the old fox he betrayed.
Commentary from Historian of the Strange
When a man and his family goes into banditry, does he deserve death? Even if he deserves death, does his family deserve death too? Yet the scheme of the fox is indeed cunning . When there is no seed, even the best irrigation could not bring forth growth. Look at the way Li exterminated the family of fox spirits From his cruelty we know that he already has the heart of a bandit, so the old fox merely helps that heart to grow in order to achieve vengeance. Suppose someone comes up to you and says "You're the true emperor." I'm sure you will run away in fear. When a person hears that he may commit an act which will result in the death of his entire family and yet he listens to it gladly, then how can he blame anyone when his family dies? Yet, some people still make this kind of mistake. The first time they hear something that will harm them in the long run, they became angry, then doubtful, then gullible, until they lose their honor, their fortune and their lives.