The silver nitrate in "caustic pencils" is in a solid form at the tip of a wooden stick, much like a long matchstick. When the silver nitrate is applied to a wound or lesion, it dissolves and can accidentally be spread to other undesirable locations where it can cause skin staining and tissue burns. Should this happen, it should be irrigated with copious amounts of water. It must be used in careful conditions and those using it should wear eye protection should it be splattered from the nose or tracheostomy stoma of a breathing patient.
Silver nitrate sticks are often used for hemostasis in medical situations where patients are not under general anesthesia, where electrocautery would be painful and inconvenient.