Due to a glitch, it quarters the Pokémon's chance of getting a critical hit. Does not stack with itself or Focus Energy.
Generation II
Raises the critical hit ratio of a Pokémon currently in battle by 1 stage. Does not stack with itself or Focus Energy.
Generation III onward
Raises the critical hit ratio of a Pokémon currently in battle by 2 stages. Does not stack with itself or Focus Energy. It also increases the Pokémon's friendship a little.
The Dire Hit appears as three Wonder Launcher items, increasing the critical hit ratio by 1, 2, or 3 stages. It costs 3, 5, or 7 points to use respectively.
Trivia
In Generation V, a boy in Nacrene City mentions that Dire Hit is called Dire Hit in Unova. This is a reference to the change in the Japanese name of Dire Hit from クリティカッター Criticutter to クリティカット Criticut, in order to make room for the number-level reference of Wonder Launcher items. Because "Dire Hit" is much shorter than the 12-character limit on English item names, this issue does not come up in the translated games.