An ensouled goblin head is an item which can be dropped by goblins. It is used to gain Prayer experience by using the level 3 Magic spell Reanimate Goblin from the Arceuus spellbook, granting 6 Magic experience.
The head can be reanimated anywhere across Gielinor only if the spell is cast on the head while it is still on the ground. Once the head has been picked up, it must be taken to the Dark Altar in Arceuus to be reanimated.
Killing the reanimated goblin gives 130 Prayer experience.
For an exhaustive list of all known sources for this item, see here