The Fire Temple. You use it in the massive room with all the boulders rolling around. Go on the top floor of that room and wander around until navi turns green and hovers by something in the distance. Play it there and then longshot your way up. You'll find 2 gold skulltulas up there.
This is the only place in the game where playing the scarecrow's song results in getting something other than just rupees.

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Thanks to Kynnella for the sig.