Master Liches are incredibly dangerous. If you fail to take them out almost immediately, they will end up summoning groups of undead minions that can become far too numerous to be dealt with as a group. A Master Lich should be 

Master Lich

A master Lich wielding a Wand of Death. Notice the huge Lifebar.

killed, polymorphed, or knocked out of commission through any means possible, as quickly as possible. When slain, a master lich may drop a blob of master lich goo. They normally wear a Grey Robe or a Black Robe and wield a staff.

When killed, the Master Lich will disappear leaving only the items it has on it. However, it is possible to burn the Lich's clothing, leaving him 'naked' appearing with green Zombie-like skin.  

A Lich is not immune to cold, whilst most of his undead friends are, making it so that you can target him with a Wand of Cold, freezing him and making the kill easier. This can be easier than using polymorph, since polymorphing items are rarer and the Wands of Polymorph come with fewer charges (usually). 

Master lichs can be tamed with ordinary food. They will not need to eat and continue to cast Raise the Dead, apparently without mesmerization timeout, making them a powerful if annoying ally capable of spawning hundreds of additional followers.

Lich army

The result of having a master Lich ally

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