"It is the night when the Celestial Moons come together in a great eclipse... that shrouds our world in darkness. The Well of Souls is the pinnacle of its terrible shadow... stirring the spirits of the deceased from their eternal rest and permitting them to roam freely within the halls of the mountain... if only for a short while."

—The Chronicler

The Night of Eternal Darkness is when the celestial moons create a great lunar eclipse, thus (presumably) causing a nonstop darkness for a short while. This event takes place near the end of The Legend of Spyro: The Eternal Night. Those who are black-hearted can't resist the temptation of the Well of Souls calling to them as the Night of Eternal Darkness draws near.

During the Night of Eternal Darkness, all corrupted souls and spirits can escape from the eternal rest and roam within the halls of the Mountain of Malefor, also known as the Well of Souls, until it ends. If a soul powerful enough were to exit from the Well, such as Malefor, then he and the evil spirits could leave and plague the realms.

Trivia

• Something similar to the Night of Eternal Darkness happens near the end of Okami, only Yami caused the world to be shrouded in darkness, not a lunar eclipse.