The candle inside it really helps you see better
Using the item with the Interact buttom (default RMB) will put the Pumpkin Helm in your head slot. While there, it will give you extra hearts, a little protection, speed, and Night Vision, details listed in the item description.
Wearing the item manually will give you every benefit except the Night Vision.
How to Obtain
This item can be found in the Spooky Chest