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Shadow Demons (MM, p. 64) have two abilities that seem to want to work in conjunction with each other:

  • Shadow Stealth - While in dim light or darkness, the demon can take the Hide action as a bonus action.
  • Claws - Melee Weapon Attack: +5 to hit, reach 5 ft., one creature. Hit: 10 (2d6 + 3) psychic damage or, if the demon had advantage on the attack roll, 17 (4d6 + 3) psychic damage.

The SRD says "You can't hide from a creature that can see you clearly", and dim light is considered to be lightly obscured. So it would seem that as long as the Demon is in dim light, it can't be seen clearly and thus can hide as a bonus action.

But there are a number of other questions about the same topic regarding rogues and their Cunning Action that seem to suggest that rogues can't use their bonus-action Hide to run, move out in the open, and then attack with advantage (see Can the rogue repeatedly hide in combat to sneak attack the same enemy? and Jeremy Crawford's responses to Twitter questions about doing so) - but in this case, combat isn't "out in the open"; it's in partially obscured conditions. Can movement be included in the Hide action?

And if the Demon can hide successfully (assuming it beats a contested perception roll), am I correct in assuming it can attack with advantage?

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Yes

See Dale M's answer to the question "What advantages does hiding have?".

Hiding

PHB p.177

Hiding

When you try to hide, make a Dexterity (Stealth) check. Until you are discovered or you stop hiding, that check’s total is contested by the Wisdom (Perception) check of any creature that actively searches for signs of your presence.

...

In combat, most creatures stay alert for signs of danger all around, so if you come out of hiding and approach a creature, it usually sees you. However, under certain circumstances, the Dungeon Master might allow you to stay hidden as you approach a creature that is distracted, allowing you to gain advantage on an attack before you are seen.

The demons can hide due to their Shadow Stealth.

They can be "discovered" by someone who has a better (passive) Wisdom (Perception) check than their Stealth (Dexterity) check. Feel free to apply advantage/disadvantages to this as you see fit.

They can "stop hiding" and be seen e.g. by making an attack (with advantage) or by "approaching a creature".

Shadow Demons

Disappearing in the shadows and then popping out to rip your face off is what these creatures do. That's why they have the powers they do. For them, the darkness is as effective as an opaque wall is for anyone else.

Of course, it's far more frustrating for the players (and therefore more enjoyable for DM) if they attack first, then hide and move without approaching - the PCs then have no targets on their turn and are left using Reactions to attack on the demon's turn.

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