The Magical Torch is a heavy-duty torch which has been imbued with magic. Its main function is to render the green lemniscatic wards on the doors of Charles Randall's Vicarage visible, as they are supposed to keep Adam from entering. They are, thus, of a specific nature, notably wards of passage.
The Torch is stashed inside the small wooden cabinet to the right side of the Vicarage entrance and is required to be used in conjunction with Belial's Wand, the latter of which will dispel the wards. As the green lemniscatic wards are hidden at first, it's essential to have both of these items equipped at all times while exploring the edifice, as trying to open a warded door will inflict considerate damage.
Looking through the extracted textures (by using the XWE Editor, or by downloading the texture pack which has been kindly made available by Taradino Cassatt), I found an image of a broken vase containing the torch, an alternate idea of the programmers to hide the torch that apparently has been dropped in favour of the cabinet stash.
Adam: Heavy duty torch. Handy for spotting Wards it would seem.