The Kohenyu species once roamed the valley in ancient times, before being hunted to extinction by the Echidnas. Only their bones remained, half-buried in the sand, hence the valley's name. These bones are preserved for all time by some strange power (possibly the Spirit of the Herd, although this is not clear).
The sacred Emerald Mine, from which the Chaos Emeralds were mined, is located in the valley. There are no Zoom Tubes in the valley and strong winds prevent echidnas from gliding down safely. A cactus known as the Poison Dryalid grows there. It is home to the Spirit of the Herd and ghost stories regarding the place were common among the ancient Echidnas.
Knuckles the Echidna once travelled to the Graveyard to find a replacement Master Emerald. Although accosted by the Spirit of the Herd, Knuckles was able to prove his good intentions and leave with an Emerald.