It is simply a booster that the player can use for removing a candy, jelly below a candy, or a blocker without using up a move. You can smash once into any candy or blockers. For example if you hit a multi-layered meringue, it will remove one layer. Only smashing candy if you hit, is worth 20 points. You cannot smash a sqaure without blockers or candy in it. You don't lose a move if you use the hammer. You will still have the same amount of moves if you choose to use the hammer or not. When it is used to break the lucky candy, the layer of the lucky candy will be removed and the special or normal candy will come out.
Tap on a candy to remove it. If used on a blocker or jelly, it takes a layer off it. Does not get rid of Toffee Tornadoes.