The poison flower is a dangerous object found in one World of Goo level, Volcanic Percolator Day Spa. It has the same purpose as fire; it multiplies and destroys Goo. Unlike fire, however, the Goo structure does not need to be flammable to be destroyed. If you light a Green Goo structure on fire, however, it does the same thing as touching a poison flower.
The poison flower is used for one thing: destroying Goo structures. While this may not seem a useful ability, it can be used to easily obtain the OCD in Volcanic Percolator Day Spa.