A Dragon (竜 ryū) is a usually defined as a large reptilian creature possessing various abilities. They are considered a type of god in many Asian folklore while monsters in many Western folklore.
Dragons in Touhou
The Dragon is the most important deity in Gensokyo and was instrumental in its creation, as well as being capable of vast amounts of destruction. A statue dedicated to the Dragon currently stands in the Human Village, its eyes capable of telling the weather or warning of an incident.
It was thought to possibly be the only dragon in Touhou, until Koutei, a young Eastern dragon, was revealed as Kasen Ibaraki's pet. It was said by Kasen that it was born from a type of Weather Stone (天気石 tenkiishi), rare stones that sometimes appear during a change of seasons with an animal living inside, called a Dragon Stone (龍石 ryuuseki).
It is also said that storm-calling dragons (雷雨を呼ぶ龍) may be born and raised from lizards mistaken for lightning and responsible for the ball lightning (球電) phenomenon. It is also noted that although Western and Eastern dragons are thought of as being entirely different, that there may actually be little difference between the two as youkai, other than Eastern dragons often being born from lizards.
In Forbidden Scrollery, the Evil Dragon was accidentally let loose on Gensokyo by Kosuzu Motoori and Marisa Kirisame from the Night Parade Picture Scroll, though its power had waned. Its form is merely that of a winged, black snake. Contrary to its name, it has a genial personality, and was grateful to Kosuzu and Marisa for its release, giving them presents in exchange.
Suiryuu is an entity seemingly revered and feared by the kappa. It was initially thought to be behind the huge spout of water which temporarily destroyed the Genbu Ravine during the attempted capture of Seiga Kaku by Suiki in Wild and Horned Hermit. There also exists Ice Scales which are thought to be the crystallization of this dragon's power. They can only be found during winter and won't melt, even in summer, so they're used by Magicians to power year-round ice magic.
Tenryuu is a dragon living in the skies, seemingly identified with the Big Dipper and called the King of Constellations. This dragon is said to be moving in order to devour the North Star, causing an event that will make Heaven and Earth tremble to occur. After hearing the kappa's explanation, Kasen Ibaraki commented that "dragons will become rulers of everything under Heaven as the Heaven-born dragon dances through the sky".
As well, Hong Meiling uses dragon imagery. Her name, Hong (紅), has the same reading as Hong (虹), a type of dragon. She also utilizes rainbow-colored danmaku, has the name dragon in some attacks, and the kanji on her hat, 龍, means dragon. However, there is no known association beyond this.