The Crown of Fools is an ancient Asgardian relic.
A Frost Giant accidentally came upon the Crown of Fools and put it on. He began envisioning himself ruling over Asgardians in a castle. Thor, Volstagg, Fandral, Hogun, and Sif then came across the castle and investigated it. The crown began giving each member of the team visions. Volstagg saw a massive feast for him to enjoy, Fandral saw a woman to rescue and start a family with, Hogan saw a dragon to fight, and Sif saw herself as the Queen of Asgard. Thor saw Loki offering him the chance to rule the Nine Realms, but quickly broke out of the vision. He saw the Frost Giant and began fighting him, knocking the crown off of his head. While Thor returned the Frost Giant to Jotunheim, Volstagg considered putting the crown on, but Sif stopped him. They returned it to Asgard.
The Crown of Fools is able to create mental images of the user's deepest wishes, and even people who aren't using it can be affected. Those under the influence will fully believe that their mental images are real, and fight others who aren't. The crown must be warn in order to activate its abilities.