Its purpose as a place to catch Mewtwo is a direct reference to Cerulean Cave in Kanto. It also shares its name with the alternative moniker for Cerulean Cave used in all language releases of the Generation I games.
The Unknown Dungeon is a tiny cave whose entrance is found in the side of a mountain. The cave is barren in terms of terrain aside from the occasional water drop and the few rocks that dot the floor. Mewtwo awaits the player in the center of the cave, facing away from the entrance.