This item is a 100% drop from the rare mob, Burgy Blackheart. is a buff that transforms your character into a ghostly pirate gnome. Your mounts will also become ghostly when mounted and will remain their normal size (in other words, they do not shrink to match the scale of a normal player gnome). Burgy Blackheart's Handsome Hat
For players who had the on-equip version: it was removed from their inventories and the new, toy version mailed to them.
From: Jepetto Joybuzz
Subject: Upgraded Toy
Hello adventurer! I recently upgraded one of your items to make it new and improved and better and slightly less likely to explode when handled. Unfortunately I am terribly busy and am unable to deliver the item in person - I hope you enjoy it!