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When a Pokemon of the opposite gender connects with a contact move against the wielder, there is a 30% chance of it becoming infatuated. Cute Charm has a separate chance of activation on each hit of a contact multi-hit move, and can status a Pokemon multiple times if the first status is removed by the effect of Mental Herb.
When the wielder is first in the party, wild Pokemon have an increased chance of being of the opposite gender.
Cute Charm is unreliable, but it certainly has its uses. Having an opponent struck by a timely bout of infatuation can turn the game around. So why isn't Cute Charm seen more often? Well, most Pokemon that get Cute Charm have a better ability on hand, such as Magic Guard for Clefable, Frisk for Wigglytuff, or Klutz for Lopunny. Cute Charm should be tossed aside for a better ability unless there are no other options or legality issues.
Found in Dream World