The dragonkin protection charm is an item from Hero's Welcome. It helps greatly during the battle with the Abomination during the quest, however, it is possible to kill the boss without the charm. It will disappear after the battle with the Abomination during the quest. It is not obtainable after quest completion.
It was originally Tarshak's, though Kalibath stole it from him in the Dragonkin Lair. As shown when Tarshak tries to attack him, it prevents most damage from Dragonkin attacks to the wearer. Realising this, the player steals it.