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Valley of the Spirits was home to the Tusken Raider village that was slaughtered by Anakin Skywalker in 22 BBY.
When his mother died in his arms, Anakin went on a murderous rampage, slaughtering every Tusken in the camp.
During the Galactic Civil War, a Force-sensitive spacer training to become a Jedi used a Force-attuned crystal to speak to a Jedi Master named Nos'lyn. The Master gave the spacer two tasks to aid in meditation. First, the initiate traveled to a Force nexus on Tatooine, an oasis where predatory creatures and their prey lived as harmonious herbivores. However, soon after, the Jedi Master dispatched the trainee to the Valley of the Spirits, where the same species of creatures were all fighting amongst each other at the ruins of the Tusken camp due to the strong aura of the dark side present there. The spacer was instructed to put the creatures out of their misery.
When the remains of the camp was found by other Tuskens, they believed that a ghost or demon haunted the area and that it had been the cause of death for the other Tusken Raiders. In 4 BBY, Luke Skywalker and Biggs Darklighter, following a band of Tuskens at a distance, went to see the site after the Tuskens had left. Luke, unknowingly using Psychometry on the scene, was profoundly unsettled and found himself begging Biggs to get them away; later he would describe the feeling as worse than a nightmare and reflect that this was the first time he had ever been truly terrified.
Tusken Raiders visiting the camp often made sacrifices of objects and organics to satisfy the ghost. They usually sacrificed beasts but in 8 ABY, attempted to sacrifice Kitster Banai, ironically an old friend of Anakin's. Kitster was saved by Han and Leia Organa Solo, also ironically Anakin's son-in-law and daughter respectively.