Onion Intellivision Game Manual 

The aim of the game is to reach the castle and beat the boss.
You should go for a few drinks at the tavern each time you arrive in a new town.
This allows you to listen the latest rumors and, among other things, progress the "story".
A useful item is hidden in Gwen's room.
It's not 100% safe, but you can drink water from wells to restore your health points.

You can "save and quit" on the island map, but it's a temporary save that will be deleted once you resume play.
There are some "side quests", and also alternative endings.