A lunar bar is a bar of refined lunar ore. It is created from smelting lunar ore, granting 6.2 Smithing experience. To receive the lunar ore, players need to mine a stalagmite in the caves underneath Lunar Isle.
During the quests, the best way to make lunar metal objects in the fastest possible manner is to use the Superheat Item spell, then head over to Seers' Village and use the lunar bars on the anvil there. However, this bar does not require a specific Smithing level to smelt.
During Lunar Diplomacy, one bar is needed to smith into a lunar helm. During The Fremennik Exiles quest, three lunar bars are required to make the V sigil, granting 25 Smithing experience.
It can be made multiple times during the quest, but when the quest is complete it is no longer possible to obtain another lunar ore and smelt it. As such, some people deliberately leave Lunar Diplomacy incomplete in order to be able to smith another lunar helm for free when they lose a helmet (not recommended because you get access to Lunar spells upon completion of the quest.)