Xien is an Assassin who has stolen the Dungeon Key to the second level of Oola's Lab (in order to ransack the place). Players must defeat him to proceed further into Oola's Lab. (He does not appear during the primary quest, The Elusive Golemancer, which takes place in a different presentation of the same map.)
You engage him periodically as you make your way to the Dungeon Gate. He usually attacks you just before aggroing other enemies, and then disappears when his health gets close to 0. Your last encounter with him will be just outside the gate itself; after he is defeated, he will leave behind the Dungeon Key to Level 2.
His build is clearly based on the once popular Shadow Prison Assassin.