The Forbidden Area is behind a waterfall in the Underground Reservoir. You can reach it as after you can collect the Skula soul. To enter, select the Undine soul, along with one of the Curly, Devil or Manticore souls and break through the large waterfall. Once you enter this area, you can also open a one-way door to the Study.
The most dangerous enemy is the Mudman, who sinks into the ground. It springs out just at the last minute causing you to be damaged easily.
There are two items of note in this section. The first is Joyeuse, a sword made of pure gold. It's main use is to sell at the shop, to help raise the funds for the Soul Eater ring. To reach it, take the south-east path from the wrecked ship and take the exit at the bottom-right. Continue down the long corridor past the mudmen and flame demons. Eventually, you will reach a room containing the sword and a mimic.
The second item is the Claimh Solais, which is one of the most powerful weapons in the game. There are only a few other more powerful weapons, which may not be easily available until you complete the game at least once. To reach this item, you will need to head to the bottom-left corner of the ship, and break open a secret wall on the left hand side. This weapon inflicts holy damage, which easily kills almost any enemy you will encounter.