The Serpentine Dagger is a specialty of the Library of Scars in Jhelom, who have many serpent-like weapons in their arsenal. While it only does the same damage as a normal Dagger, it is seen as a status symbol by the members of the guild.
During Ultima VII, the Avatar found one of these daggers at the murder site in Minoc and confronted Master De Snel of the Library of Scars about it, proving that it was one of their daggers. De Snel recognized the dagger as the one he'd given Hook as a gift and, seeing that his cover was blown, attacked the Avatar. In that battle, De Snel died.