an event with nothing to hit
There is no enemy here. Pile enough torches together underground and they turn on you, one flame at a time, until every one of them has fired. Your weapons are irrelevant for the entire encounter. It is a pure dodging test, and the only thing in the game you beat with movement alone. That also means there are two completely different builds for it: stack mobility and never get touched, or stack defense and simply walk through it eating hits.
starting it on purpose
The trigger is density rather than a summoning item. Get yourself below the surface layer, then have enough torches packed into the square of ground around you, and it begins on its own. Any mixture of torch types counts toward that total. Moving while you place them can set it off slightly early, because the count occasionally tallies the same torch twice. It will not start at all for a character who has already used the reward or is carrying one.
what happens once it starts
Torches fire in a random order, a few per second, and each one snuffs itself out afterward the way a wired torch does. The flames pass through blocks to reach you, though they can catch terrain again once they are past. For the whole run you are under Blackout, so you are dodging with most of your screen taken away. Torches you place mid event join the queue like any other.
In multiplayer it picks a single target. Only that player goes blind and only that player can be hit. Anyone who has already used the reward is ignored entirely, and so are critters and ordinary enemies, so nothing else in the room is affected by what is happening to you.
winning and losing it
It ends when the torches run dry, and you need most of them to have fired before you get paid, so bailing out early is worth nothing. Dying or climbing back up to the surface cancels the whole thing. Wandering into an area with no torches also stops it, but that one still pays out if enough shots had already gone off. Everything relights when it finishes, unless you leave the world partway through, in which case the spent torches stay dark and you have to switch them back on or replace them. There is a short cooldown before you can trigger another attempt.
torch choice matters more than it sounds
Only real torches join in, so light the room with lanterns and you control exactly how many shots you signed up for. Each flame takes the color of the torch that fired it, and some colors disappear against stone. The White Torch is the easiest to track if you can spare the diamonds, the Ultrabright Torch is the cheap substitute when the Traveling Merchant has been through recently, and the Ichor Torch is next after that. Ice, hallowed and jungle torches read well or badly depending entirely on what the walls behind them look like.
building for it
A big empty room with the torches lined along one edge gives you the longest travel time and only one direction to watch. A tighter version puts the pile in the middle of a small square with ropes and walkways so you can orbit it. The classic lazy method is a hellevator: torches spaced down a rope line with the cluster at the top, then ride down and let the flames chase you the whole way. A minecart loop hammered into a closed circuit around a pile does the dodging for you.
keeping everything else out of it
A Calming Potion and a Peace Candle cut spawns so nothing wanders in halfway through. Running the event inside your town cuts them further, with one catch: fail there and the place is unusable until you either finish the job or pull the torches out. Anything granting a dodge chance helps, the Brain of Confusion included, and grappling hooks matter more here than they usually do.
the reward, and doing it twice
Torch God's Favor gives you the option to have every torch you place turn into whatever type suits the biome around it, which quietly removes the luck penalty for careless lighting. Consuming it fills in the bestiary entry and locks the event out for that character. The check only looks at your inventory, though, so parking the item in a chest lets you run the whole thing again. That is how you get the music box if you have already used yours.