Hakon's Axe was once a weapon belonging to Hakon. After the Megalith Dance was destroyed, Hakon's spirit was trapped alone in the Archmage's Cave. ("Shadows of the Past") But, Wolf was soon drawn to Scotland where he met the ghost of his ancestor, and agreed to return to Manhattan to take revenge on Goliath.
The axe soon became Hakon's one link to the Earth-plane as he had traveled so far away from Wyvern Hill. However, during the battle with Hudson, the axe was destroyed in a trash compactor, finally banishing Hakon from the Earth-plane. ("Vendettas")
Behind the Scenes
Hakon's axe is one of Greg Weisman's few regrets about the series. He now feels that instead of an axe, it should have been a mace. Specifically, the mace Hakon wielded when he destroyed Goliath's clan and was in the series opening.