If held by a Houndoom, the Houndoominite allows it to Mega Evolve into Mega Houndoom if its Trainer has a Key Stone. A Trainer can only Mega Evolve one Pokémon per battle (or only have one Mega-Evolved Pokémon at any given momentZA).
As a Mega Stone, it is unaffected by item-negating effects (such as Embargo and Klutz). Item-manipulating effects (such as Trick and Fling) cannot give or remove a Houndoominite from Houndoom.
Outside of battle
If held by a Houndoom, the Houndoominite allows it to Mega Evolve into Mega Houndoom when it performs a Spectacular Talent during a Pokémon Contest Spectacular if its Trainer has a Key Stone. Houndoom will remain a Mega Houndoom until the Talent Round ends.