Update 2: There's already a new loot cave, and it's actually easier to mine than the first.
Update: All good things must come to an end. Bungie has shut down the loot cave, saying that "shooting at a black hole for hours on end isn't our dream for how Destiny is played. Our hope is that social engagement in public spaces is only one part of the Destiny experience."
Original story: If you've stumbled across a cave outside the Cosmodrome in Destiny and wondered why the hell everyone was shooting at it, well, here's the answer. It's an endless spawn point for easily defeated enemies, who drop fabulous loot that everyone gets.
Force Strategy Gaming explains how to find and farm this spot. It takes about two minutes to reach after dropping into the Cosmodrome area. Once there, as long as you have at least one other player with you (and the site is so popular, it's a given) and you're standing back of a certain spot (shown in the video), you can blast away at the endlessly respawning acolytes and thralls. They drop gear, blue engrams and sometimes purple ones.
If you get there and nothing is respawning, check the surrounding area for survivors you or others may have missed. Kill them, and it's back to farming. Also, standing forward of a piece of slab debris on the right turns off the spawning, so only move in when there's loot to be farmed.
The area is so rich there is an official Cosmodrome Loot Cave etiquette post in Destiny's subreddit on Reddit. Here are some basic manners to observe when farming the cave:
Please don't run up every time you see something shiny drop. I get it, you need to know whether you've just dropped a legendary engram and not just some heavy ammo. But even if you have, it's not like you can equip it yet. And it makes it so much more rewarding picking up a ton of loot and not just one thing.
Titans, we all love you really, and your bubble shield is a godsend during public events. But please don't pop it over everyone when they're farming. We can't fire through and this almost always leads to a thrall gallivanting off somewhere.