The Poison Mushroom is an item (an extremely poisonous mushroom) in Super Smash Bros. Melee and Super Smash Bros. Brawl. It is similar in shape to the Super Mushroom, but slightly darker and sports a more menacing face. Instead of making the character larger, the poison mushroom shrinks any character that touches it. While shrunk, brawlers deal much less damage, have smaller hit-boxes, become five-eighths their normal weight, and have higher pitched voice and sound effects. It, however, makes characters with better recovery but decreases the damage of edgesweetspotting. The Poison Mushroom's effect lasts about ten seconds.
Poison Mushrooms made their debut in Super Mario All-Stars, where they'd cost characters a life if picked up. These nasty fungi are dark and foul-tasting, and in Super Smash Bros. Melee, they make you shrink on contact. With your diminished stature comes a loss of power and mass, making you a prime target to get smashed offscreen with even a light attack.
A penalty item that shrinks whoever grabs it. It's hard to distinguish from a Super Mushroom, so you may find yourself getting small when you wanted to get big. When you're in miniature form, your attack power drops, and even the lightest attack can send you off the stage. That being said, a small target's hard to hit. Your best plan when you're tiny may be to run.