Slug Hemligssen is a spy working for King Gjuki Sorvott IV of Jatizso and is part of The Fremennik Isles quest. Slug is dressed up as a jester, and has been trying to get information out of Mawnis Burowgar. Whilst trying to amuse him, he broke his arm whilst juggling, and so has failed since. He hasn't been found out yet though.
Interestingly, players are not able to walk through and will have to go around him, should he be in their way at all.
This NPC's name is partly composed of Scandinavian words: "Slug" is a Swedish adjective meaning "sly, cunning", and "Hemlig" is a Swedish adjective meaning "secret". This fits his profession as a spy.
Saying an incorrect password to him will trigger dialogue where he and the player character say seemingly random phrases back and forth. One of these phrases is "Oranges are not the only fruit", the name of a novel written by Jeanette Winterson.
He insists on calling the player "Operative Budgie". When the player complains and asks to be called "Operative Panther" instead, he says that Panther already exists and is on a mission in Al-Kharid, adding "it's my way or the highway". This is a reference to the movie Reservoir Dogs.