At first glance, Shadow Town resembles an ordinary Nar Shaddaa slum. Its population makes it unique. Rather than housing underworld gangs or powerful Hutts, Shadow Town is home to imprisoned individuals who were once useful to the Empire and who may be useful still‒scientists, assassins and genetic experiments too valuable to kill and too dangerous to release.
Cranial implants designed to explode upon leaving Shadow Town's borders are implanted in prisoners' heads. Secondary prisons manned by Imperial personnel store prisoners who must be kept docile. Many residents of Shadow Town make the best of their early, forced retirement, cooperating with Imperial authorities and living relatively “ordinary” lives… but nearly all would flee, given an opportunity.
The Empire pays the Hutt Cartel a considerable sum to keep Shadow Town running. For the Hutts, the risk of keeping prisoners even the Empire doesn't want inside its borders is offset by the considerable rewards.