The Cave
The cave is Grendel's Cave. It is a large place. In the cave are Monsters and Items, both of which can help you to advance in your adventure to kill Grendel.
You gain most of your experience and obtain your best loot by slaying monsters. When you first start out only take on monsters on the first level of the cave. With each monster you kill, you gain experience and improvements. Improvements are how you level up in Grendel's Cave. When you notice that you are killing monsters and no longer getting improvements then it is time for you to go lower in the cave. At first, only venture down on level at a time, killing monsters on each level until you no longer improve. Then you are ready to go down one level more.
As you advance, you may be taking hits from monsters and losing health. If your health reaches zero you die, so try to avoid this. In the Barn, you can buy healing potions to take with you. Drinking a healing potion restores your health to 100% so it might be wise to travel with a few at a time. The Witch will restore your health to 100% but make sure you have rings and your magical ability is at least four when you go see her.
The deeper you go in the cave the more dangerous the monsters but the better the loot and the greater the payoff. The cave is a balancing act, finding how skillful you are at killing monsters beyond your experience level without dying.