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The user and the target's HP become the average of their current HP, rounded down. If this HP value is higher than either Pokemon's maximum HP, then that Pokemon's HP is simply maximized.
Pain Split is a nice move for Pokemon that don't have access to a solid recovery move or have low HP, and it can be utilized as an attacking move to great effect against some of the bulkier threats out there. Gengar is one of the best users of Pain Split, as it can take care of Chansey and Blissey easily--both of those Pokemon have huge base HP stats. Without access to this excellent move, Gengar would be able to do next to nothing against those walls. Furthermore, it can regain a large portion of its own HP in the process. Rotom-W is another notable user of Pain Split, as the move provides a good source of recovery and deals good damage against the aforementioned threats, which would otherwise wall Rotom-W completely. However, most of the Pokemon with access to this move either don't need recovery, have high HP, or have access to the more reliable Recover.