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You engage with Molag Bal when you come across two men talking outside a house in Markarth. One of the men ask you to join them inside the abandoned house to investigate. You then begin the quest, “House of Horrors.” You begin to go down the house and things start to move on their own, the other man starts to run while you hear a voice. It is Molag Bal, and he is telling you you to kill the man. You do so and he tells you to continue through the house. At the bottom you find an alter, Molag Bal tells you to retrieve a man, a follower. You go and release him from his caprice, and once you return, Molag Bal makes you torture the man and then kill him. He than gives you the Mace Of Molag Bal.
This is a small quest, but an important one. No, if you don't do it nothing bad will happen. Personally my favorite weapon is The Mace Of Molag Bal. It's evil and only wants the power to kill. Getting this weapon early in the game can be useful since it is very powerful. Serving any god is a choice, I tend to serve them all, but Molag Bal is his own kind of fun and evil.
Molag Bal is the god of schemes. His main desire is to capture and consume mortal soul. Which makes sense since his mace needs souls to work as well as captures them when powered. He created vampires and Xivkyn which are both races in the Elder Scrolls franchise.
Though you never see Molag Bal in the Skyrim game there are some things from the franchise we find. He is known to look like a hybrid of a bull and a reptile, which includes horns, fangs, claws, and a long tail. As with most gods, he does not identify with gender, but most of his followers are male but there has also been a cult known as “The Witches Of Molag Bal.”
He is also known as one of the Daedric princes. Daedric is a name for petites that make their home in the realms of oblivion, in these realms the princes are the most powerful beings, which means they cannot be killed, so following their commands is not a bad decision.
The mace itself is a unique weapon as well as a daedric artifact. You first see it as a rusty mace on the altar of Molag Bal. Some other names the Mace is known by is the Vampire Mace, the Lord of Domination, Enslavement, and Rape.
"Also known as the Vampire's Mace, the Mace of Molag Bal drains its victims of magicka and gives it to the bearer. It also has the ability to transfer an enemy's strength to its wielder. Molag Bal has been quite free with his artifact."
There are many stories and legends about the origin of the direct mace. But the actual origin can be traced to a moment in time when Molag Bal found and trapped an Orcish blacksmith and forced him to be a slave in the pits of Coldharbour, it's said after that he was forced to make the mace after we was turned into a Soul Shriven. Soul Shrivens are people and things that have had their souls stripped by Molag Bal. They are non-hostile expect when they are trapped under his hands and become Feral Shriven.
Personally, I love this quest and story. A long time ago when I first played Skyrim I didn’t know much or what was happening, but the House of Horrors quest really left an impression and I remembered and recommended it during the next times I played.