Find Item is pretty much a second chance at looting the same monster.
Find Item will not work on some monsters.
When Find Item is used on a corpse, it gives an X% chance of doing a drop as if you had killed the monster normally. The same treasure classes will be used, but the chance of a successful drop is determined by the level of Find Item, not by the number of players in-game.
Using Find Item on Super Unique monsters that have corpses gives a good chance of getting rare, set or unique items again.
Once a corpse has been used (like with Find Potion), Find Item will not work on it. This can also be said about Find Potion and Grim Ward.
Use Find Item on a corpse to prevent it from being raised by monsters such as Fallen Shaman.