When you have the Dowsing Machine Poketch application ready, the touch screen
displays a cross that looks something like targeting axes or X- and Y- axes
from geometry. The lines are "hatched" with cross marks indicating distance in
steps away from where your player is currently standing.
When you tap the touch screen, concentric circles expand from the point where
you touched, to a size roughly equal to one-fourth of the screen.
If there is no item to be found, nothing will happen after the circle reaches
it's largest diameter.
If there is an item in the direction of the point tapped, relative to the
middle of the screen (where your player is standing), the Dowsing Machine will
repeat the expanding concentric circles.
If there is an item to be found within the range of the circles, it will appear
as a flashing dot on your touch screen. Use the "hatched" marks to get an idea
of the direction and how many steps your player must move to reach the item.
Look carefully for the dot. If the dot appears on the cross lines, it may be
difficult to see.
So that pretty much covers it. Oh, one more thing is that you will have to stand next to the item and click A when facing it.
Hope I helped! :) Source