After you obtain the hammer in the Palace of Darkness in the Dark World. Return to Kakariko village in the Light world. Beside the Smith's house, you will see a pole you can now knock down with your hammer, proceed to jump into the well and walk into the door on the north end of the room. You will see a statue of a hand holding a bowl with a red substance in it. Use your magic powder on it and a little demon will appear claiming to curse you. He instead will put a 1/2 mark on the top of your magic gauge, making it use half the amount of magic to use your magic using items such as your medallions and rods.