It interrupts the cast of whoever you throw it at, makes them slip, and immobilizes them for one second. It therefore does have some real, albeit limited, use in PvP and in PvE. However, it also works when thrown at friendly targets, so it can be used for comedic purposes.
In Warlords of Draenor, this item will be added to the new Toy Box feature and no longer take up a bag slot. You will be able to "use" the item straight from the Toy Box interface.
The Toy Box will be account-wide and therefore so will this item.