1) A covert crack-house, usually specialised in stock of the magic mushroom variety. Referred to in 'La Belle Dame Sans Merci' where the writer John Keats expresses his love for narcotics. One interpretation is that the 'Elfin Grot' is the home place of 'La Belle Dame' where she seduces the knight. Another interpretation, the right one, is that John Keats is a smackhead.
2) The name given to a witch's vagina.
Male 1: This is good stuff, where dya get it?
Male 2: The skanked up Elfin Grot.
Male: You'd be amazed what I can do with my wand ;)