The toxic caves are north of Klamath. Before the War, it was a military warehouse of some sort. Now, it's a radioactive cave inhabited by geckos (little and gold, though mostly gold). Smiley, the trapper from Klamath, is waiting at the end of the second level for someone to save him.
Every step in the green sludge inflicts damage, unless rubber boots are in your inventory. Party members will also require boots in their inventory. Boots can be found on the first level in the caves, and in Trapper Town. The boots may melt after a while though. At higher levels (significantly above the levels which the quest was designed for), boots may be completely unnecessary, as you and your party will have enough resistance to shrug off the damage, or take none at all. Wearing power armor will also negate the sludge effects. It is important to take note that if the Chosen One takes enough unprotected steps in the sludge, they may grow two extra toes a month later.
Some excellent equipment can be found here provided that one has a set of electronic lock picks and high repair skills, which one probably won't have when first arriving here to rescue Smiley. Strangely, the electronic lock pick Mk II sometimes doesn't work for this. One has to be wary of the security robot that resides here, who will attack with rocket launchers as soon as one goes down the elevator to the 3rd level. Loot includes a Bozar, a Glock 86 plasma pistol, and combat armor Mk II.
In the earlier version of the game, there is only a laser pistol, a little bit of ammo, and some chems found here. There is no armor, Bozar, or plasma pistol.
If the Chosen One doesn't wear the rubber boots and spent too much time walking in the toxic goo, they will feel a tingling sensation that will eventually grown into a bunion, that will become an extra, mutated toe.
The sentry bot guarding the lower level will attack only with its rocket launcher, rendering it helpless should its rocket arm be crippled.