If a Pokémon is holding an Psychic Seed while the field is Psychic Terrain, it consumes the Psychic Seed and its Special Defense is increased by one stage. The Psychic 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 Psychic Terrain by Psychic 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 Psychic Seed and has a terrain-changing Ability is switched in during Psychic Terrain, its Ability activates before its held Seed can. Magic Room and Embargo fade before terrain does, so if Psychic 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 Psychic Seed when the field becomes Psychic Terrain, each Pokémon will consume the Psychic Seed before Symbiosis transfers any item (including Psychic Seeds).
If a held Psychic 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).