Using an active item will drop it onto a pedestal on the ground.
When Isaac takes damage, there is a 2% chance one of Isaac's passive items will drop on the ground.
Notes
Butter! can sometimes spawn within the special bedroom created by Lil Portal.
Single-use Active items do not drop and are consumed as normal.
Tainted characters with active items in their consumable slots can drop them from getting hit, however they will only be able to pick it back up into the active item slot.
Synergies
Blank Card: As Blank Card is dropped upon usage, the recharge time for it is reset to 4, allowing to use more expensive cards much more frequently.
Esau Jr.: Using Esau Jr. while holding Butter! will spawn another copy of Esau Jr.
Void: Items that are normally unusable when holding Butter! can still activate their effects if absorbed by Void.
Interactions
Book of Virtues: The item on top of Book of Virtues will be dropped on the ground, but the book itself cannot be dropped from using it, nor form taking damage.
Damocles: Dropped active items will not cause extra item pedestals to spawn, nor can getting hit cause Isaac to drop an activated Damocles.
How to Jump: Isaac animates a jump but his movement remains normal and he cannot go over any obstacles.
A normal jump is made before dropping the item.
Mama Mega! + Golden Bomb: Since Mama Mega is not consumed if Isaac has a golden bomb, it will be dropped after activation.
Metronome: Effect from the Metronome is immediately canceled beyond the gain of hearts, coins, bombs, or keys. Visual effects may persist until leaving the room.
Granted item effects will last until leaving the room.
Notched Axe: Notched Axe is dropped when the charge bar is empty.
The Pinking Shears: The flight granted by The Pinking Shears persists, but the body familiar is immediately canceled.
The familiar remains.
Razor Blade: Deals damage to Isaac as normal but does not increase damage for the current room.
Does increase damage.
Strategy
Butter! allows the transportation of active item pedestal from room to room. On its own this ability is useless, but can be used to set up plays involving room-wide pedestal effects; after gathering all available active item pedestal in a single room, Isaac can then:
Concept for the Butter item on the top left corner, along with other trinkets and items, by Edmund McMillen.
Trivia
Butter! was made by Florian Himsl (developer and programmer of the original The Binding of Isaac game).
Butter!'s effect may be a reference to the English slang "butterfingers," which is used to describe a person who has difficulty holding or catching things.
Butter! can sometimes spawn within the special bedroom created by 
Lil Portal.
Blank Card: As Blank Card is dropped upon usage, the recharge time for it is reset to 4, allowing to use more expensive cards much more frequently.
Esau Jr.: Using Esau Jr. while holding Butter! will spawn another copy of Esau Jr.
Void: Items that are normally unusable when holding Butter! can still activate their effects if absorbed by Void.
Book of Virtues: The item on top of Book of Virtues will be dropped on the ground, but the book itself cannot be dropped from using it, nor form taking damage.
Damocles: Dropped active items will not cause extra item pedestals to spawn, nor can getting hit cause Isaac to drop an activated Damocles.
Glowing Hourglass: Glowing hourglass functions as normal.
How to Jump: Isaac animates a jump but his movement remains normal and he cannot go over any obstacles.
Mama Mega! + 
Golden Bomb: Since Mama Mega is not consumed if Isaac has a golden bomb, it will be dropped after activation.
Metronome: Effect from the Metronome is immediately canceled beyond the gain of hearts, coins, bombs, or keys. Visual effects may persist until leaving the room.
Missing No.: Butter! can get rid of Missing No..
Notched Axe: Notched Axe is dropped when the charge bar is empty.
The Pinking Shears: The flight granted by The Pinking Shears persists, but the body familiar is immediately canceled.
Razor Blade: Deals damage to Isaac as normal but does not increase damage for the current room.
The D6, 
Dice Shard, 
Cracked Dice etc., to re-roll every single item pedestal in the room.
Black Rune, or 
Abyss to consume all pedestal for their respective benefits.
Diplopia (or more riskily 
Crooked Penny) to double all item pedestals before doing any of the above.
Butter!'s appearance prior to Booster Pack#4.
Concept for the Butter item on the top left corner, along with other trinkets and items, by Edmund McMillen.
Active Item Modifiers 
The Binding of Isaac: Rebirth
