What is this thing for? I have never found a use fo rit....

Behind one Rakshasa there was something like portal. Click on that "portal" while you have that gem in inventory.

There are also Opal and Sapphire stone to be used there. All three gems you should find in that area, and all three of them have a description:
"This stone has a certain energy about it. It may come in useful although, at this point, you aren't sure where."

What will happen for each stone is a major spoiler. Try it for yourself. ;)

Thanks