The Blood Elf Bandit Mask is a piece of head slot clothing that provides no bonuses or armor. It is popular because it has a low level requirement and can be equipped by any class. It also does not bind, so a high level character can farm it, get it enchanted using an arcanum, and pass it to an alt. Because of the popularity of this item on both sides (RP-value and the such), it has appeared in auction houses on both sides, usually going for much gold. (value is falling gradually, but still in the tens of gold; has gone for hundreds in the past)
This item drops from Blood Elf Bandits on Azuremyst Isle. They can be found just about anywhere on the island, but primarily near Wrathscale Point on the southern coast. The locations are well documented on a few of the external websites listed below.
Because these blood elves are in the service of Kael'thas Sunstrider and not the Horde, both Alliance and Horde can kill the bandits. The Horde, however, would have to find a way to sneak onto the boat from Auberdine in Darkshore to Valaar's Berth on Azuremyst Isle.