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Castle Grayskull is a fortress in the original explained in the 80s series, that contain the "secrets" to powers unknown to mortals. Which is also the place of origin of the Swords of Power & Protection.

This fortress is located in Eternia,

the planet where Prince Adam (Adora's twin brother) also resides in. This castle also resides the guard and the gatekeeper of Grayskull, the Sorceress. A woman who has since guarded Grayskull and It's secrets for years and the mentor Prince Adam about mastering the Power Sword and the secrets the castle contains.

This castle was built to safe gaurd the secrets of the ancient mysterious secrets of the universe. Being built by the ancient eternians.

Also in the 2002 adaptation, 2002 He-Man and The Masters of The Universe. Instead of Grayskull just being the name of the castle, it belonged to King Grayskull, Adam & Adora's ancestor.

Instead, in the 2002 series, King Grayskull would be the original inhabitor of the castle and source of He-Man's abilities/sword. His wife, Veena would be the original and first Sorceress and keeper of Grayskull.

The origin of the power of the castle would be from him and be kept in his sword still named the Sword of Power. The cause of him locking away his sword was to keep it away from Hordak and to give to the his great grandson/nephew, Adam.

EDIT:

King Grayskull is a character made for the 2002 adaptation. He does not exist in previous shows/comics from the 80s/90s.