The Mother Ghost was a ghost stuck on the surface of the Isle of the Dead looking for her son Ali.
Alexander took the spectral handkerchief she left behind and gave it to Ali's ghost. The spectral child was able to follow it to his mother, presumably allowing both of them to move on.
Behind the scenes[]
The title Mother Ghost originates from KQ6 hintbook, she is called mother ghost at least once in the game, for example if the player tries to give her handkerchief to Charon. The character is referred to as "Mama" by her son.