You know, I'd hate to be that guy who blindly copy-pastes stuff, but to answer your answer, and because I can't word it better my self, here:
>The Dowsing Machine is a Poketch application that can be used anywhere within
the game. It allows the player to locate hidden items. These items can be
almost anything, from types of Poke Balls, to health items like Potions, to
other useful items like Honey.
>The Dowsing Machine will locate only items that are "on-screen" (within the
window of your game). If you are scouring a location to look for items, you
will need to move your player around and use the Dowsing Machine often in order
to check an area completely.
>You obtain the item by directly facing the hidden item and pressing the "A"
button. You can't get the item if you are standing on the exact spot where the
hidden item is located.
>You get the Dowsing Machine from Dawn, Professor Rowan's assistant. She will
greet you when you enter Route 207 from Route 206 and give you the Dowsing
Machine and the Vs. Seeker.
USING THE DOWSING MACHINE
>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.
>You don't have to use the Dowsing Machine to obtain the hidden items. As long
as you know the exact location of an item, you can face the spot and press the
"A" button to get the item.
Source : This wonderfully detailed Walkthrough on GameFAQs
>It looks like a graph with out anything graphed on it with both axis drawn and it goes right down the middle (its on your Poketch obviously) and you click it and circles will appear. after that it will then make a little blurb if there is a item near by.