This intricate cloak belongs to Algernon, at Feldepost's Inn . It is a Nymph Cloak in everything but name. It offers a +2 charisma bonus to the wearer, and the cloak can be used to charm creatures and persons. You can aquire it by slaying or pick pocketing Algenon. Once equipped you can access its ability via the Quick Item slot (it casts a Charm spell that lasts for one hour, with a -1 penalty to the save). After you acquire it, you can bring it to Pheirkas in NW Baldur's Gate to complete the subquest Steal Algernon's Cloak
Algernon's Cloak Bug
Due to a coding error, rather than depleting once used, the number of charges wraps around from 1 charge to 65000 charges, more than will ever be used in the game. The Enhanced Edition fixes this, turning the cloak back into a one-use-per-day item.
In-Game Description
“ | Algernon's cloak is imbued with magical properties such that the wearer will seem to shine with an inner glow. | ” |