Manhattan Batman had quite the backstory. But before introducing Manhattan Batman, one had to start with Doctor Manhattan. He was also a typical case of a character whose setting surpassed his actual feats. However, DC Comics editors had adopted a very clever way to explain his less-than-overwhelming performance.
Doctor Manhattan had once been a scientist. After accidentally being drawn into the quantum realm, he himself became a quantum life-form. In the original setting, he had not been all that powerful, but later evolved into an almost omnipotent god. He had abilities such as traveling through time and space, creating universes, erasing reality, and so on. Before "Metal," he had been an astonishingly powerful presence in DC Comics, where power scaling had still been relatively restrained.
And speaking of Doctor Manhattan, one also had to mention Watchmen. The famous Rorschach was a member of the Watchmen team. Rorschach and Doctor Manhattan had been teammates, but their relationship had been rather ordinary, and they had even disagreed during major events.
That brought up one of Doctor Manhattan's defining traits: after becoming a quantum life-form, he had gradually discarded his emotions and become an absolutely rational being. This was precisely why Doctor Manhattan rarely intervened in Multiverse-level events. His answer was always to let nature take its course; there was no need to interfere. It was also the chief reason his feats had seemed lacking.
Manhattan Batman had appeared very late. Only after Laughing Man emerged did he appear as something like background scenery or a prop. His setup was simple enough: there had been a Batman who experienced something similar to Doctor Manhattan, came into contact with the same experimental materials, and became a quantum life-form as well.
But not long after he appeared, Laughing Man took him down and turned him