See, you touch it, you own it. You own it, sure, you get a run of good luck to beat the Devil. But, you lose it, that luck turns. It turns so bad that you're dead inside a week.
The rabbit's foot is among the many cursed objects that John recovered over the years. It was created by a conjure woman in Baton Rouge 100 years ago and is a cursed object more than a lucky charm. Once you touch it, as long as you still have it, you have exceedingly good luck. Once you lose it, you have exceedingly bad luck, and usually die within a week.
The foot is created by cutting it off a rabbit in a cemetery, under a full moon, on a Friday the 13th. The curse can be broken by destroying the rabbit's foot - the ritual involves burning it in a cemetery with bone ash and cayenne pepper.
Sam and Dean find out John kept a storage container outside of Buffalo when it gets broken into by Wayne and Grossman. The only thing missing is a curse box with the rabbit's foot in it. They soon catch up to the thieves and retrieve the cursed object, but Sam touches the rabbit's foot in the process. After leaving, Wayne gets killed when the curse turns his luck bad. After contacting Bobby, he starts searching for a way to break the curse, but the foot gets stolen in the meantime, turning Sam's luck bad.
They discover that the thieves were hired by Bela Talbot to recover the foot. When Bobby gives them Bela's location and a cleansing ritual to destroy the foot, Dean heads over to Queens to catch up to Bela, who plans to sell it to a private collector named Luke who offered her $1.5 million for the foot. When Dean confronts Bela, she explains that she found the foot after using a Ouija Board to contact a few ghosts of the people it killed, who were tuned into its location. In the meantime, Dean pickpockets Bela and uses the foot's good luck as an advantage over Bela, who is left unable to shoot him. Later, when Sam is being interrogated by Kubrick and Creedy, Dean uses the foot's luck to effortlessly take them both out.
Later, when they take the foot to be destroyed in the graveyard, Bela arrives and demands the foot back. She takes advantage of the curse by shooting Sam's shoulder, who can still be shot due to the foot's bad luck. Although Dean complies, he tosses the foot to Bela, tricking her into touching the foot and getting cursed. She reluctantly tosses the foot into the embers, destroying it.
According to Wikipedia, "In American folklore, a rabbit's foot is carried as an amulet believed to bring good luck."