It's any product used to promote something. The primary purpose isn't really to gain revenue, it's to promote something, promo items are often given away. It can be anything from a band t-shirt to a coffee cup with your comany logo on it, a calendar with your logo on it that you give to customers. Common promo products are pens with the company logo.
When to use them completely completely depends you'd have to ask the question with more detail as to what the business is and what the goal is. For example, I work for a tire manufacturer, if I wanted to promote my brand at a farming trade show I would give away promo items like branded pens/shirts/hats. If I wanted to increase customer loyalty in a store I have the manager hand out promo products as gifts to his customers, it helps build the relationship. Like at xmas, I have store managers give customers free coffee mugs with the logo, another big one is we have snow brushes for cars with our logo on it.
Again, you use them wherever and whenever it's a good fit.
Work in marketing