The Crystal Cavern is a large cave underneath Dreamland Castle, filled with hundreds of crystals in various shapes, sizes and colors. The cave can be accessed through a door on the beach at the foot of the cliff that the castle is build on.
The crystal cavern is the place where the magic of Dreamland is hidden away, and where Queen Dagmar plans to unleash it with help of Bean. For this purpose she has been taking Bean to the caves ever since Bean was a little girl.
The water inside the cavern is known as the "pool of reflection" among the Trøgs. For them, the pool is a holy place where they can go to if they struggle with negative thoughts, which they can dispell by picking up as spirit rock (actually just a regular rock), say out loud what they want or what is bothering them, and then throw the rock into the water.
In "The Battle of Falling Water", Bean fought Bad Bean in the caves, and ended up unleashing the magic in the process. In the next episode, "Darkness Falls", the magic was seen leaking into the world above the Cavern.
In "Goodbye Bean", Bean faced Dagmar in a final showdown in the Cavern, and caused a large part of the cavern to collapse, trapping Dagmar and taking away her powers.