PokéBase - Pokémon Q&A
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Sorry if it's a stupid question, no one ever told me.

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Increases the chance of finding shiny pokemon
The Shiny Charm (Which is usually only obtained if your Pokedex is complete, excluding the event legendary Pokemon) will increase your chance of finding a shiny Pokemon anywhere and any time by 300%, 1 in every 2,730 Pokemon you find (Just as Kartillian beat me to saying. *rage quits*).

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It increase the chance of finding shiny Pokemon in the wild and by breeding. It can only be obtained by obtaining every Pokemon in the national dex.

Source: http://bulbapedia.bulbagarden.net/wiki/Shiny_Charm
http://www.serebii.net/itemdex/shinycharm.shtml

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It increases the likelihood of encountering shiny Pokemon.

The rate gets increased to 1 in 2730, which makes them about 3 times more likely.

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So do you like, make the Pokemon at the front of your party hold it?
The shiny charm is a key item
So, it's just in your bag and then the rate goes up?
yep all there is to it