What is it?
On the elevator ride down to Rapture, you'll watch a creepy commercial about a man that can light his girlfriend's cigarette with a snap of his fingers. That man had spliced himself with the Incinerate plasmid. Follow his example and you'll be able to shoot crackling fireballs out of your palms.
When should I use it?
Incinerate is nearly as all-purpose as Electro Bolt. The basic attack is both extremely damaging and extremely hilarious. Any Splicer, Big Daddy or boss you ignite will panic and run around wildly until the flames subside. During that time, you can plug away with other plasmids and weapons, or increase the heat with extra Incinerate - the more you use it on a single enemy, the faster his life will burn away.
This plasmid is at its best, however, in combinations. Oil spills should be torched at every opportunity, as the larger, hotter fire can wipe out several Splicers at once. (Just be careful to keep a distance.) Producing makeshift Molotov cocktails is also possible - simply set an object on fire and then throw it with Telekinesis. Most satisfying is following an enflamed, terrified creature as he flees to the water and then frying him with Electro Bolt as soon as he touches the surface.
Sadly, Incinerate cannot melt a monster that's been frozen with Winter Blast. On the other hand, it can melt the ice blocking many of the doors in Rapture.
Does it work against a Big Daddy?
A Big Daddy will react the same way as a Splicer when Incinerated - he'll go friggin' nuts. His moment of frenzy is usually much shorter, though, and he's much angrier afterwards. Electro Bolt and Winter Blast are better options for stunning.
Unless you're attempting one of the combination methods described above, we would not recommend going at a Big Daddy with Incinerate alone.