It is required to gain farther access within Twinblade's Camp, used by the Hero of Oakvale. It can be obtained by paying 1,000 gold to a bandit or by winning a game of memory right beside the bandit. An easier (but more evil) way to obtain the seal would be to kill the bandit that is holding it. Either way you it will allow you to fight Twinblade. After you complete Find the Bandit Seeress you will keep the bandit seal as a trophy.