The cape is, at it's core, a very fancy looking cape of protection +2. Beyond that though it appears to be a wondrous magical item of singular nature.
Rabbit actually read about it in a book of Malice's once. Ostenso, in it's infancy as a city and before it was properly a territory of Andor, was once under siege. A thief who primarily stole from the rich helped the poorer citizens of the outer wall first by stealing them food, and then to defend their homes when the lord had abandoned the wall to their enemies.
Using this cape he hid people from attackers, and working with his group of friends he managed to retake the outer gate and trap some of the enemy army between the walls. Saving many people and turning the tide. He ultimately vanished, assumed dead along with his friends. This must have been the final resting place of their tokens and his magical crimson cape, though who knows if the ancient hero truly died or merely slipped out of legend.
On top of it's innate protection it cannot be stained or blemished, and anyone prominently wearing it will receive a +2 competence bonus to charisma checks. In addition, so long as the user is standing next to a solid surface that could provide cover (wall, furniture, tree, etc) they can pull up the hood to turn invisible as per the invisibility spell. Moving from their position will also break the invisibility.
When the user uses the cloak to hide in this fashion it will leave an indelible crimson shadow mark on the surface used to hide.
Kevan hands the cloak to Rabbit, "Here buddy, study that thing up. As to fighting here, I don't mind cause we're going to win. You can't be such a drooping daisy. But, I like the idea of leaving the lady here. Gets her out of our hair so we can go do the manly stuff. I guess we'll let Rabbit tell us what this cloak does and then go deal with the ghouls. Did I ever tell you guys about the time me and a warlord by the name of Kang the Merciless went into a den of vampires? I was just his squire of course, carrying holy symbols, his back up weapon and a bunch of turnips. I hate turnips but apparently so do vampires. Anyway,..." Kevan continues until Rabbit has made a pronouncement of what the cloak is or until someone says it is time to go.
"OK. Let's go kill some ghouls."
He straps his axe-gauntlet to his hand.
Nodding at Jaxom, and Kevan's logic for once, "Indeed it's time to end this fight between the living and the undead. Once we identify their leader I'll use Alden's enchanted spear."
The group decides to leave their charge in the hidden room and press on to the final chamber to end things. Kevan secures the secret door again to hopefully keep anything from disturbing her slumber. Leading the group forward the halfling peeks into the unlit room beyond, noting a group of ghouls arranged in a loose formation inside. Standing and waiting, but not quietly. They jerk their heads around, seeming to twitch and making guttural sounds in their throats.
With no intention of sneaking up on them the group steps forward, arranged proudly for battle. Tymos makes a show of unsheathing his sword and pointing it to the center ghoul, the one wearing leather they had spotted before.
"Your head is mine!" he announces loudly.
Initiative Order:
Party
Ghouls
Tymos
"We should hold the line here," Alden suggests. "If we enter the room, they can flank us."
"You stink of the grave and your momma dresses you funny!" Kevan shouts as he lets fly with an alchemist fire at the northern most ghoul. (range 30' -4 to hit)
Ready for the battle Jaxom holds with Alden's advice. "Right. Let them come to us. Then we'll destroy them."