She is made from the Hot Pink Little Anything Muppet, much like Prairie Dawn. Prairie and Betty Lou are sometimes difficult to separate. For example,sesamestreet.org once used an image of Prairie for both her character page and Betty Lou's. (As of December 2009, though, the site has replaced the picture with one of Betty Lou.) A 1994 document from the CTW archives also indicates the difference between the girls by their hair. 
During the early years, Betty Lou was a minor character who was performed by whoever was available to perform her. She seemed to appear more in books than on the show. Apart from singing "I Want a Monster to Be My Friend" (credited on The Sesame Street Monsters! album as "Little Girl"), notable appearances included singing "Amigo" with her bilingual friend Carlos in a sketch from the mid-80s, and serving as lead singer (backed by Grover and various Anythings) for the song "Exercise" in the 1980s. She was an extra in the song "Listen to the Bells" and, according to the Sesame Street 35 Years Anniversary Game, she once opened up a medical program for dolls called the "Betty Lou Clinic."
As part of an increased attempt by Children's Television Workshop to balance the number and prominence of the male and female characters, Betty Lou appeared on a more regular basis, in street storylines and not just inserts, beginning around 1993. Lisa Buckley became her consistent performer, and Betty Lou developed an interest in collecting dolls before fading once again into the background. One episode found her "despondent over the evil spell cast on her doll's lost love, Prince Ted." Her 1990s renaissance was notably captured in original framing material in the 1996 video Do the Alphabet and in the song "Girl of the World."
Betty Lou lives with her mother. She has a baby sister, seen in the book Grover Learns to Read. She also has a little brother named Herbie, who appeared in at least one book, The Sesame Street Bedtime Storybook.