"I'm like the birds I care for. People pass me in the street. They see me but they try to ignore me. They prefer I wasn't in their city."[src]
The "Pigeon Lady" was a homeless woman who lived in New York City.
At some point in time, the woman had a job, a family, and was in love with a man who eventually fell out of love with her. As a result, she refused to fall in love again and stopped trusting others.
Later, the two encountered each other a second time. He attempted to run from her, but got his foot caught. She freed him, and Kevin apologized for being scared of her. They then went to a concert in a loft above Carnegie Hall and heard a performance of "Oh, Come All Ye Faithful."
There, she told Kevin about having heard the world's great music from the loft: Ella Fitzgerald, Count Basie, Frank Sinatra and Luciano Pavoratti. When Kevin asked her if she brought her friends up to the loft, she told him she did not have many friends and explained that she was like the birds she cared for in that people would ignore her and wish she was not there. Kevin admitted that he could relate to this, feeling as though he was his household's "pigeon" since he was the youngest. The Pigeon Lady then explained to Kevin her past and advised him that a good deed erases a bad one, and that on Christmas Eve, good deeds counted for extra. She suggested to Kevin that he think of the most important thing he could do for others, and go and do it.
Kevin told her that if she needed someone to trust, it could be him, and that he would not forget to remember her, and the Pigeon Lady then gave one final parting piece of advice, telling him not to make promises he could not keep.
Later, when Harry Lyme and Marv Murchins brought Kevin to Central Park and Harry had Kevin at gunpoint, the Pigeon Lady came along with a bucket of birdseed, and told them to let Kevin go. When they do so, she told Kevin to run. Harry then tried to shoot her, but was unable to do so. The Pigeon Lady then threw the birdseed onto Harry and Marv, prompting pigeons to attack them and knock Harry and Marv to the ground, and the Pigeon Lady laughed. When Kevin thanked her, she blew him a kiss in return.
The next day, Kevin ran into the park and they wished each other a Merry Christmas. Kevin then gave her one of two turtledoves that Mr. Duncan had given him, and then added that as long as they each had a turtledove, they would be friends forever. The Pigeon Lady was touched by this and thanked Kevin, who reaffirmed his promise to be her friend. She smiled and they hugged before Kevin hears his father yelling about the bill from Kevin's first stay at the Plaza Hotel.
Her role in the film is very similar to Old Man Marley from the first movie; both initially appeared intimidating, but turned out to be quite friendly, and intervened when the bad guys cornered Kevin while wearing the same boots.
She alludes to "Feed The Birds" from Mary Poppins.