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Plague Town is a location to the East of the Flax Fields. The entire town and about a 30 block radius of the town is engulfed with poisonous plague radiation which damages you with time. You can resist this for 60 seconds by consuming a Potion Of Antidote. You can scavenge certain exclusive items here, but at the current time there is not much use or profit in doing so, considering the cost it takes to survive around those parts. Plague Villagers can be found roaming around the area as well. Slaying the villagers can be profitable if they drop good steel-tiered equipment.
The town map:
The [Loot]able containers labeled with pink dots: