The Asylum

Spellhold was an asylum located on the island of Brynnlaw off the coast of Amn. It was a magical prison that was under the command of the Cowled Wizards and anyone who broke the magic laws in Athkatla would be sent here and locked up. Underneath the building is a magical labyrinth which was used in exceedingly rare cases to test inmates to see if they are sane enough to leave.

Baldur's Gate II
At end of Chapter 1, the Cowled Wizards send Jon Irenicus and Imoen to Spellhold for using illegal magic. By the time you have reached the prison to rescue Imoen, Irenicus with the help of Bodhi has taken over the asylum, using it for his own tests, and uses the technology there to take Imoen and your's soul away from you, and use them as him and Bodhi's own. Bodhi then sends you and the party to the magical dungeon underneath from which you must escape.