The Dursleys—Aunt Petunia, Uncle Vernon and their hephalump of a son, Dudley—are Harry's Muggle relatives. They agree to take him in after Lord Voldemort murders his parents. Once he's in their care, though, they treat him exactly, precisely the way a cocker spaniel treats his chew toy…to the point of making him sleep in a cupboard rather than enjoy a room of his own.
Frankly speaking, they're almost living cartoons. And that's partially by design. J.K. Rowling knows the power of fairy tales, and wanted her wizard story to reflect it. Hence the Dursleys bear a more than passing resemblance to Cinderella's wicked step-sisters, for example, or (to quote a more recent example) Aunt Sponge and Aunt Spiker in Roald Dahl's James and the Giant Peach.
Strictly speaking, they're evil, though it's not the flashy 1,000-years-of-darkness stuff wielded by Voldemort and his gang. Theirs is a much smaller kind of evil, and a much pettier kind. The Dursleys are infected by the kind of workaday evil that we see way too much of in the world, but grudgingly ignore because of the much bigger problems occupying our attention.
Besides filling that fairytale role of the wicked step-family, the Dursleys also serve as a reminder of this petty kind of evil, and how damaging it can be. But it also demonstrates something just as important: that this mean-spiritedness generally comes, not from a sense of superiority, but from a sense of complete inadequacy.
PETUNIA: My perfect sister being who she was. My mother and father were so proud the day she got her letter. "We have a witch in the family. Isn't it wonderful?" I was the only one to see her for what she was...a freak!
Petunia's just jealous. Suddenly this horrible women who Harry probably looked at as the incarnation of Satan is revealed to be a sad, petty person who has to tear him down in order to build herself up.
In other words, the Dursleys are bullies.