The Smoke Bomb drops a thick cloud at your feet so enemies lose track of you. Use it to escape a fight that has gone wrong or to set up a hidden attack.
Equip it with R2 and down on the d-pad, then throw with R1. The cloud blocks sight lines, so you can slip away and go back into stealth, or step out and strike someone who can't see you.
Capacity is low, so save it for emergencies or for leaders. With Blinding Dust, enemies inside are open to free hits. Healing Incense turns it into an emergency heal as well.