The Mysterious Trader is an NPC that appears on any square that either has a well or a Sundial. When you see him he sells a special weapon that he smuggled from other games. As of Febuary 11, 2011 he only sells one item:
When found he sells them from 5-100 gold pieces. The arrows are sold in stacks of 3 so you get 3 arrowheads for use in the badlands. You will know hes on the screen because a green message will say:"You see a Mysterious Trader!"
Be Careful though as sometimes the mysterious trader will be hard to spot! Like in the castle he blends in a bit! Joe has stated that
"In the future i plan to add even more items that he [mysterious trader] can smuggle in."