The Fairground is a special support building summoned by the King of Mirkwood for his people to enjoy, representing the tantalizing feasts that Thorin's Company tried but failed to join. The elves are extremely protective of their festivals, so at the sight of any nearby enemies, the structure will disappear in the blink of an eye. Only one Fairground can be present on the battlefield at a time.
The Fairground is a building that requires a well-thought out placement. For this, there are two main strategies. The first strategy is placing the Fairground close (but not too close) to battles or enemy bases. As troops become injured, you can rotate them out to heal at the nearby Fairground while you send fresh troops to take their place. Once they are healed, you can rotate them back in and just repeat the process. This strategy is risky, however, because enemies could easily make a push to get near the Fairground and make it disappear. The second strategy is placing the Fairground close to your own base or other well-defended area, using it more for resource generation and the extra command points. While in theory this strategy is safer, all it takes is one nearby enemy until you are checking when Thranduil can use his Feasts of Mirkwood again.