I do like it as a 'figure it out' item, but I will provide some insight.
*SPOILERS*
The horseshoe reveals where the seed pod (bullet) is in the chamber of the banana gun (in Royale Mode). The banana gun chamber moves counter clockwise, so use that as a guide to what the Horseshoe is showing. Horseshoe pointing straight up (when tips are glowing) is 'this shot is fatal'.
The thing is, your opponent can see the horseshoe as well, so you both know where it's at in the rotation. The computer players know when they're in a losing situation, and will spin if they have a spin left. They'll also take advantage of the bullet being ready on their turn. (One character doesn't care as much about such things, and may screw up)
So - you can rob an opponent of their spin; you can find out the next shot is your winning shot and use it; or if you use it AFTER an opponent spins, if it's not in the final part of the rotation, you can set up the turns so your opponent is doomed.
Disadvantage is you get shot because of bad counting, or you have to use your spin (if you have it) to save yourself.
It's not as straightforward as 'Shoot Other With No Penalty', but there's a useful strategy that can guarantee a win under the right circumstances.