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The following information is based on events in Interview for a Wizard and contain spoilers.
The fear potion is a potion made from the herb Dragon Breath that works like a more powerful version of the fear curse. The potion was developed by Raven Claw and Mily Breezy from Celina Bane's original curse. It requires diluted Dragon Breath, shaken not stirred, combined with the correct spell (possibly the fear curse) and when cast on a living person, it will force them to live their worst fear in the form of a nightmare and cause them to die from a heart attack. The original curse had a similar effect if the person it was cast on did not wake, but it seems the potion was able to effect more than person simultaneously.
Claw's fear potion is considered a weapon of mass destruction, just like the deadly potion that first got the herb outlawed in the United States and considered a weapon of mass destruction in and of itself.