What is the Bone Amulet for?
The iron door on Level 9 has the following riddle:
The clue is
Made from the dead
Guillotined man
does not need me
The bone amulet is the answer to the riddle, which you solve by placing it in the alcove next to the door.
It is used to unlock a door much much later in the game.
As an additional note, there's two bone amulets available in the game (as far as I can tell), but you only need one of them. So if you find both, there's no need to keep the spare.