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Inflicts the holder with the Toxic poison status at the end of the first turn in which the holder was sent out. The poison status occurs after the holder would take poison damage, so the holder takes no poison damage on that first turn.
The Toxic Orb might seem like a horrible item at first, but it's actually quite useful on certain Pokemon. If held by Heracross, Conkeldurr, or some other Pokemon with Guts, it will activate the ability and increase Attack, giving what is effectively a Choice Band boost while retaining the ability to switch attacks, for the price of 12.5% of HP per turn. In addition, it also doubles the power of Facade, which gives Pokemon such as Ursaring and Swellow an extremely powerful STAB attack while allowing Heracross and other Pokemon a reliable attack that is as strong as a super effective Hidden Power on neutral opponents.
Flame Orb is an alternative that can do everything above as well, but the poison status inflicted by Toxic Orb causes less damage in the short-term while the burn status inflicted by Flame Orb causes less damage in the long-term—after 3 turns they will both have done the same amount of damage to the holder, before which Toxic Orb does less, and after which Flame Orb does less, owing to the increasing damage from Toxic poison. For this reason, Guts Pokemon that switch out often, such as Swellow, will typically use Toxic Orb, while those that try to stay in and sweep, such as Ursaring, will prefer Flame Orb.
Other abilities that can be used to take advantage of the poison include Marvel Scale, Quick Feet, and Toxic Boost. Toxic Boost is essentially exactly the same as Guts, only it only works with Toxic Orb, and Quick Feet boosts Speed as opposed to Attack. However, Marvel Scale is not a good ability to combine with Toxic Orb, as it is a defensive ability, so the damage from poison is rather counterproductive, hence why nobody uses Toxic Orb Milotic.
Battle Subway, 16 BP.