Skull Earring is a Keepsake that increases Zagreus' damage output while his health is below a certain threshold. It is obtained by giving Megaera a gift of Nectar in the House of Hades. She will not appear in the lounge until you have beaten her for the first time. The keepsake's effects can be enhanced by clearing enough encounters with it equipped.
Unequipping the Skull Earring between levels will remove the low health damage bonus granted by the item.
From Megaera; you share an Intense Bond
Your deaths at one another's hands... All your pleasure, all your pain, united.