Mayfil, nicknamed the Death City, is a Limbo to which souls travel when they die, and from which not all souls can leave. Its spectral residents will attack the living on sight.
Mayfil is the former Wingly city of the dead. After its total destruction during the Dragon Campaign, the souls of people and creatures that did not completely die came here. During Wingly rule, Winglies' souls were sent to the "Death City" when they died.
This is also where one of the spheres that protect the moon were hidden, and would be the last one to be unsealed.
Although not directly, stated, the game suggests that Zackwell's death frees the souls in Mayfil. The sky previously filled with "swirling souls" has cleared by the time the party goes outside, and the soul attracting devices appear to be working in reverse.