This is what determines what targets are valid for this item to be used on during Wonder Launcher battles. You should almost never need to actually set this line on any item, since this properly naturally just inherits the same value as the BattleUse property.
The only time you should ever need to set this is if you're making a custom battle item that can be used to target any battler on the field, including opponents. If so, you should set OnTarget as the value for this property. If so, this item will be able to target any battler when used in battle. The only items that utilize this are the various "Urge" items, such as the Reset Urge, Ability Urge, Item Urge and Item Drop items.
If for some reason you want to create a custom battle item that has different targetting functionality during Wonder Launcher battles than it does during regular battles, you can also set this to any of the values that the BattleUse property accepts.
In summary, here are all of the values that the LauncherUse property can accept:
OnPokemon
Used by Potions, status cures, Revives, most medicine.
OnMove
Used only by Ethers and Max Ethers.
OnBattler
Used by X Items, Persim Berry, Red Flute, etc.
OnFoe
Used only by Poke Balls.
Direct
Used by Guard Spec., Poke Flute, Poke Doll, etc.
OnTarget
Used by Reset Urge, Ability Urge, Item Urge and Item Drop.