You need him in order to get to the Labyrinth of Time dungeon. First you need to complete the main story up the point where you're ready to go back in time to face Chaos. Talked to the cloaked figure and he will leave town in the south exit. Follow him to the back of the Chaos Shrine and examine the Miasma emanating from the back wall to open a doorway. Walk into the column after listening to what the cloaked figure has to say.