It has a different effect on different forms, but in general is meant to remove some mental/intrusive aspects of the gameplay. In case of goo wolf it should remove automatic rubbing, and prevent you from going into softlock. It's also your only way to turn back once the protagonist refuses to turn back.
The reason medkit rework is needed is because right now you can only use the yellow medkit after you gained this substate, which isn't immediately obvious for most forms, unless you use a blue medkit just to see the refusal, or inspect only some thought bubbles. That rework would make it possible to use yellow medkits instantly rather than after reaching this state, making it much more straightforward feature. But technically speaking, the medical note mentions how they work. There's no point worrying about this feature as the rework for the whole medkit system, not just the yellow ones, is planned.