Who was the little girl being possessed by Orochimaru during his fight with 3rd Hokage? I am wondering, during Orochimaru's fight with the 3rd Hokage, there's a little girl whom Orochimaru possessed.

Who was that girl? What is her ability, or why did Orochimaru choose to possess her? 

I tried browsing the net and replaying the sequel but still can't find that little girl in the story.
I believe you are talking about the girl Orochimaru "became" during the fight with the 3rd Hokage on the roof during the Chunin exams (Ch. 121). I just went back and read that part of the story and I don't believe her identity was ever stated. This is the episode in the anime where he rips his face off and reveals this girl's face:



In other words this is the girl he used as his vessel.