This move has no known effect in battle. When a Pokémon uses this move, it and its target ally will perform a brief animation together.
It will fail if used in a Single Battle or Horde Encounter. It will hit the target even if it has used Protect, Detect, or Spiky Shield, but will fail if the target is protected by Crafty Shield or is in the middle of a semi-invulnerable move like Fly or Dig.
So currently, there is no known effect of this move. I do believe it may increase the happiness, but we will have to wait and figure out what it does, before we confirm the effect.
My theories are: that this happiness effect either increases happiness of Pokemon permanently, or is some kind of temporary happiness effect in XY only available in battle. Maybe it effects moves used that require the use of happiness if Pokemon moves, such as Return, so it could increase the damage. Or another theory: it's a special move that does nothing.
"Ally Pokémon hold hands. This makes them very happy."
commented 17 minutes ago by Leafseryyx
Yeah. The only thing that I know it does is increase the happiness of allies. But I don't know if this is the regular happiness, or what,