Made by legendary blacksmith for the First Commander of the Watch, Rendelius, in the Age of Legends (or the First Age, or something like that — Opportunity to tie this item in with our other game-related things). Passed on from Commander to Commander during the centuries, it was often improved functionally and incrementally invested with magic. At some point lost and completely drained it falls on the player to find it for the current Commander and bring it back to its full glory (could tie in with some quests).
Uses: Obviously light-related. Some ideas:
+ Detect monsters. Pulse when monsters are nearby (like those ping devices in Aliens), or simply glow in a different color.
+ Detect monster strength. Stronger monsters make the lamp glow stronger.
+ Illuminate hidden secrets (with some drawbacks to make it balanced)
+ Change color based on NPC disposition
+ Would be cool if it could be made an UI element.
+ If you rub it, something happens.
+- needs oil? or unlimited oil?
- Doesn't work against Codex imps or anything related to the Codex for that matter.
Could be an item with different levels, e.g. at level 0 it's broken, at level 1 it's like a torch, at level 2 you get to detect monsters, and so on.