If a Pokémon is holding a Misty Seed while the field is Misty Terrain, it consumes the Misty Seed and its Special Defense is increased by one stage. The Misty Seed is consumed even if the holder is not otherwise affected by the terrain (i.e. it is not grounded or in the semi-invulnerable turn of a move). It is not consumed if the holder already has +6 Special Defense stat stages (unless its Ability is Contrary, in which case it will not activate if the holder has -6 Special Defense stat stages).
If the terrain is changed to Misty Terrain by Misty Surge, then immediately changed by another terrain-changing Ability, the Seed is consumed before the other Ability activates; however, if a Pokémon that holds a Misty Seed and has a terrain-changing Ability is switched in during Misty Terrain, its Ability activates before its held Seed can. Magic Room and Embargo fade before terrain does, so if Misty Terrain would dissipate on the same turn as Magic Room or Embargo, the Seed will activate before the terrain dissipates. If multiple Pokémon each hold a Misty Seed when the field becomes Misty Terrain, each Pokémon will consume the Misty Seed before Symbiosis transfers any item (including Misty Seeds).
If a held Misty Seed did not activate because its holder's Special Defense is already at +6 (or -6 in the case of Contrary), it will not activate for its current holder until the terrain is changed or its holder takes damage (unless the holder is switched out).