Merlin's lyre was a musical instrument owned by the wizard Merlin. Merlin hid the lyre in a Welsh cave, along with other possessions including a cauldron, a crystal ball, and a chest containing the Scrolls of Merlin. 
On September 7, 1995, Lydia Duane and Arthur Morwood-Smyth discovered the cave.  Wind blowing through the lyre caused it to emit a haunting sound, leading them further into the cave where they found the Scrolls. ("A Lighthouse in the Sea of Time") 
In his ramble for the episode "A Lighthouse in the Sea of Time", Greg Weisman said that he wondered what had happened to the lyre.  He later said that he planned to explore this in the spin-off Pendragon.