It's the cave below Tamoe Highlands.
The Pit is only interesting in Hell difficulty, as it's one of the alvl 85 areas --- the highest area level in the game (of the maps that have monsters, that is). This means every item can drop there (with the exception of items that only certain monsters can drop, of course).
It's popular because of the high level, and because it's populated with Act 1 monsters --- easy pickings even for weak chars. It is comparatively large, has a decent number of bosspacks, and level 2 in particular is cramped with bosspacks and monsters.
Note, however, that the monsters are normal monsters, not baby mephistos. People often expect high uniques, sets and ZODs to rain in the Pits, which is NOT the case.