The Peril Room is the proving ground of net.heroes, where the LNH tests new members and trains them for combat. It is a holographic environment where people can practice combat to the death free of real danger. Well, unless it'd been sabotaged, which happens pretty often.
In the Classic LNHQ, the Peril Room was constructed by Contraption Man on the orders of Ultimate Ninja so the LNH could fight a battle to the fake-death to establish who was the best leader. It was immediately sabotaged by Acton Lord and Netlurker, who tried to trap the LNH in Limbo.
Before the Peril Room, the LNH used a gymnasium for training sessions (a bit similar to the X-Men's Silver Age Danger Room).
During Robot Invasion, the Peril Room served as a mission briefing room for the LNH, before the LNHQ later developed other rooms for that purpose.
For a long time, the most common form of initiation into the LNH was facing Ultimate Ninja in the Peril Room in a doomed Kobayashi Maru type scenario. The record for longest survival time belonged to Glitch Girl at 3 hours and 18 minutes, up until Merissa finally defeated him. After that humiliating defeat, the LNH initiation procedures changed a bit, introducing the Membership Application Wheel.
If there's a Peril Room in LNHY it's probably for the best no one has used it.