This item is sought after for it's unique appearance and usefulness in RP settings, as the only way a player character can adorn the emblem of the now mostly defunct nation of Dalaran. In more recent times, with the rebuilding of Dalaran, it is a prized possession for any Dalaran Mage roleplayer and roleplay guilds, who does not have Wrath of the Lich King, as with the expansion, Mages can travel to Dalaran and buy the Tabard of the Kirin Tor, as they start at friendly with the faction from level one.
It drops from level 13 to 22 mobs, all found in and around the region of Dalaran and it's neighboring region of Silverpine Forest, in the town of Ambermill. These men and women of the Kirin Tor, the ruling body of Mages that is charged with the governance and protection of Dalaran, are long standing members of the Alliance, and as such can only be killed and subsequently looted by Horde players. So this cloth chest piece would only be available to Alliance players via the neutral Auction House's of the Steamwheedle Cartel.