The Guillotine Room is found by going through the bleeding part of the wall in the Bed Room in the number world. It is filled with Lunatic Toriningen, and the guillotine gives you the Severed Head effect. This room is actually significantly small however the randomly placed cabinets and Lunatic Toriningen chasing after you along with some frightful music (the same effect as when you encounter Uboa) creates an illusion that this room is much much larger. To more easily gain the Severed Head effect (that's only purpose is to make the veiwing of Madotsuki's ghost possible) use either the bicycle or stoplight to avoid the Toriningen.
If the sane Toriningen in the number world is stabbed before entering the Guillotine room, then you will actually appear in a larger version of the area. This version contains 6 lunatic Toriningen.