The Temporary Prison is an empty room where the magico Bane of Sanity is held. Attempting to fight her leads the Cutie Knights to the Hallucination "dungeon." This is an entirely optional mid-game dungeon, but boasts some of the most unusual and bizarre content in the game.
Preparations
While the Temporary Prison and Hallucination are not difficult dungeons in a traditional sense, mental status effects are common here. Purchasing some seals of focus beforehand may come in handy.
Finding the Prison
This structure appears as a brown building on the eastern side of the overworld map, but will only become available after you've discovered its existence. To do so, after completing the Research Base mission, use the rope on the well in the center of Magical Camp. Inserting the kitchen knife or screwdriver in the first switch in the hallway that follows will allow you to pass through and enter into the camp's administration building. Speak with Daisy and she'll unlock the door to Marianne's room. Read the memo on the floor (or on the desk if you happened to discover the Maid Transformation here) to unlock the Temporary Prison dungeon.