When right-clicked, it will apply an additional amulet slot to the player that used it and consume five uses. These additional amulet slots allow you to equip multiple Middle Gem Amulets at once and maximize power. There can only be a maximum of two additional amulet slots on one player at once in Survival Mode, and these slots will disappear should the player die, requiring the use of the item again.
It can also be applied to player-defending mobs (Tar Minions and tamed Harlequin Toads, and in the future Mud Golems) by right-clicking them with the Amulet Slot, consuming only two uses. As expected, this allows one to equip multiple Middle Gem Amulets on a single mob.