The Jester is located in the Jester's Prison and is only accessible after completing the quest once, then talking to the Jailer at least 48 hours later.
The first time doing The Jester quest, the Jester appears as an NPC. When repeating the quest he appears as a creature.
On death:
Jester is reduced to cinders!
Jester says, "Ooooo! You got me!"
The Jester makes a dramatic fall clutching his chest and vanishes.
Jester says, "Enough games for the moment."
The Jester throws a wide range of items, including tables, health bolts, arcane pyramids, chairs, and even a lifesize cow.