This place is where the Mad Mage used to live before arriving in Mintwallin and being captured by Markwin's troops. Here he summoned lots of strong creatures to protect his treasure, including Demon Skeletons, a Dragon and a Giant Spider. There are Daily Respawns of a Silver Dagger, Strong Mana Potions and Blank Runes inside the chests on the second floor. West of that room is the entrance to a small sewer with Cyclopes and Rats.
For the books that can be found here, see Mad Mage Room Library.