What is it?
A ghostly decoy that stands, cowering, wherever you place him. Smelling fear, Splicers will forget all about you and concentrate their fury on the trembling bait instead.
When should I use it?
When losing to a large group of monsters, this plasmid can buy you some precious seconds of time. If he's in their field of vision, Splicers will invariably prefer bullying the poor Target Dummy instead of you, the guy with all the guns. They're stupid like that.
After you've shot them in the back enough times, the Splicers will remember your presence, so make sure to choose weapons that can finish them off quickly. In fact, these moments are the perfect opportunity to tag an entire crowd with Enrage. Then, when they're finished beating up your doppelganger, they'll simply begin warring with each other and leave you out of the whole affair.
Does it work against a Big Daddy?
When you and a Big Daddy are the only guys in the room, the Target Dummy is your only option for distraction (Enrage being suicide, basically). Conjure him a good distance away from you and the Dummy can keep a Big Daddy out of your face for much longer than Electro Bolt or Winter Blast.
In fact, by putting the Dummy in a corner or enclosed space, you can lure the Big Daddy right where you need him for the Cyclone Trap jail cell trick to work.