Some Quest Items can be purchased from a Merchant and some are scattered throughout the map.
It is used to craft an Ancient Mask which increases the HP of The Knight. Upgrade Items in Hollow Knight are items that are used to enhance The Knight's status such as health, SOUL, and his equipment. Mask Shard is an Upgrade Item in Hollow Knight. Still, maybe you can make some use of it. This old thing? Merely a fragment of something larger.