It is a legendary weapon said to hold the power to destroy the Fiendish Five dragons as said through a prophecy. But in order to activate its power 'a threat must come from above.' This relates to the dragons. However despite its initial success with Yami figuring out the prophecy, the dragons merged together into Five Headed Dragon and even with the sword the odds were against Yugi and his friends. It wasn't until the village's guardian dragon, Blue-Eyes White Dragon was summoned from the prayers of the sacrificial girl and with its power combined with the Duel Armor and the sword, the combined dragons were destroyed. After the dragons were destroyed and Blue-Eyes returned to its place, the sword was returned to its pedestal.
It can be used with any Duel Armor but it was mainly used with the Black Luster Soldier/Blue-Eyes White Dragon combo. It can absorb the power of any Dragon monster, evidenced by the dragons owned by Yugi and his friends dragons powers also being absorbed in addition to the evil dragons.