The Folium Discognitum is a Daedric artifact created by Sheogorath. It is a tome of knowledge, filled with insights compiled from the ramblings of madmen. The pages bear near incomprehensible scrawls that move to avoid your gaze when read. The power obtained from reading these insights is the equivalent of absorbing at least six skyshards.
Sheogorath has been known to offer the tome to mortals as part of a deal. Arch-Mage Shalidor, ever hungry for knowledge, traded the island of Eyevea for the tome in the First Era. He went on to regret the deal, and in 2E 582 he returned to Tamriel to win back Eyevea from Sheogorath. Valaste, the Mages Guild's Master of Incunabula who aided Shalidor in his attempt, was slowly driven mad by Sheogorath. When the time came to reclaim the island, the Mad God gave an adept of the guild the choice to either restore Valaste's sanity, or take the Folium and allow Valaste to remain in the Shivering Isles for eternity. It is unknown which option was taken.
For game-specific information, see the Elder Scrolls Online article.