This is the Zork encampment, when you come out of the mainland palace tunnels you wind up in the land of the zorks they are at war with, if you're like me you wind up in Zork 3 which is pretty tough. It's basically a mountain area with a big encampment as seen here. There is also an alliance NPC. Zorks are level 25 and on the island they scale up to level 3.