Source: Dungeons & Dragons
Location: Astral plane, and under the ground
Threat Assessment: Originally: 5 Now: 8. A mind flayer was originally just another monster. Smarter, yes. Full of psychic ability, oh hell yes. Able to eat your brain if you get too close. Not too shabby. As the D&D mythos grew though it turned out that they were a large race of scheming tyrants armed to the teeth with weapons, magic, and various minions and beasts. It's enough to make a drow go pale.
Limitations: They are still mortal and cold steel is still an answer. A better answer though is ranged weapons.