Whimsydale is a unique location in Diablo III that can only be accessed by killing a Rainbow Goblin. It uses the Whimsyshire tileset, and is overall identical to it. This location was added in patch 2.1.
There is no special reward for beating it, except for a chance of obtaining Cosmic Wings from the rare spawn Princess Lillian. It's worth noting that although it is possible to find more than one Rainbow Goblin in a game, it will open a portal to the same Whimsydale, so there is no benefit to continuing to hunt for Rainbow Goblins after one has been located.
As of the March 2017 patch, Whimsydale drops have been greatly increased, sometimes producing upwards of 2,000,000 gold and 10 legendary items in a single run.