The Glittering Grotto is a location within the Winter Isles. According to the Wizard's Companion, the Glittering Grotto is a cave that can allow one to glimpse into the past. At the end of the cave, the party will be fighting the Cerboreas boss.
This section contains plot details, which may spoil your gameplay.
After receiving their new clothes, Oliver, Esther, Swaine, and Drippy go to the Glittering Grotto to find a gem for Mornstar. At the end of the cave, they fight Cerboreas and retrieve the star stone.
While in this cave, Oliver (and co) sees Alicia and the past ruler of Hamelin talking to each other even though the conversation happened a long time ago.
There is a secret passage inside the Glittering Grotto. These generally look like big ice walls. However, the Tomte in the cave will tell you (when prompted) that the wall is the entrance to the secret passage.
There will be icicles inside the Glittering Grotto. Make sure you have enough MP to cast Fireball or Pulse.