Just outside of Stonecrest (east gate), you will find a NPC called Delnar Steelblade.

Say Villain Skull to him and he will mention that he collects them. You can find Villain's Skulls from Nightcreepers and Pilferers (you can find them out of the east gate of Stonecrest (near Delnar Steelblade)).

Collect some skulls and return to Delnar Steelblade. Say Villain Skull and when he asks you if you are turning some in say Yes.

You will be rewarded with a Chaimail part (random) and experience points. You have to tell him Villain Skull once only and he takes all the skulls you have in your backpack.

He also keeps track of the accumulative total of skulls you've given him. He keeps track because your xp reward raises according to the skulls you have turned in. For almost all skulls you will be rewarded with 10.000 experience points except for the 10th skull (you will receive 25.000 xp), for the 25th (100.000 xp) & for the 100th (500.000 xp).

Note: You can do this quest as many times as you want.