Wood vinegar is distillate from pyrolized wood carbon (aka biochar or charcoal).

When charcoal or biochar is produced by pyrolysis, volatile gases are released and must be vented to prevent the kiln, sometimes referred to as a retort, from building up excessive pressure and bursting. These vented gases are flammable and present a potential energy source. This may be utilized to accelerate the combustion in a kind of feedback loop increasing the temperature of the retort.

The same gases, collectively known as wood gas, may also be used separately to heat a building or cook with. Some have even devised a way to use wood gas to power a vehicle. This was done in areas that experienced shortages of gasoline during WWII (see link below). Anyway, when a charcoal retort is used to produce wood gas it is called a wood gas generator.

Even if the gases are burned to generate heat, or other energy, the condense-able portions may still be cooled to create wood vinegar, along with other useful distillate. Very dry wood which contains heartwood is best for vinegar production. The process is similar to that used in a still except, in this case, we are condensing combustion by-products and not just vapor. In Thailand, for example, the gases are fed into a long, sloped, bamboo "chimney". A slit is made on the bottom edge of the sloped bamboo to allow liquid condensate to drain out. A container wired beneath the slit catches the raw wood vinegar. Assuming our retort is a 55 gallon (200 liter) metal drum, we should get between two and eight liters of raw wood vinegar. Don't worry, we still get the same quality and quantity of biochar and combustible wood gas.

The raw wood vinegar must be aged now. Place in a jar and leave undisturbed for at least three months. Four distinct layers should form. The yellow layer is the wood vinegar. It will be near the bottom on top of a thin layer of silted tar. Above that is a layer of dark translucent oil and at the very top is a layer of clear oil. Carefully siphon off the wood vinegar without disturbing the layers.

So what is this stuff good for? To answer that I will include a quote from the:

Agricultural Production Sciences Research and Development Office

Department of Agriculture

Thailand.

"Raw wood vinegar has more than 200 chemicals, such as acetic acid, formaldehyde, ethyl-valerate, methanol, tar, etc. Wood vinegar improves soil quality, eliminates pests and controls plant growth, but is slightly toxic to fish and very toxic to plants if too much is applied. It accelerates the growth of roots, stems, tubers, leaves, flowers, and fruit. In certain cases, it may hold back plant growth if the wood vinegar is applied at different volumes. A study shows that after applying wood vinegar in an orchard, fruit trees produce increased amounts of fruit. Wood vinegar is safe to living matters in the food chain, especially insects that help pollinate plants."

Note that one liter of wood vinegar will be diluted with up to 800 liters of water. A little goes a long way.

So, to paraphrase, this stuff acts like a growth stimulant for all parts and stages of plant growth, deters pests and improves yields. Safe for pollinators, too. Not too bad for something that is basically a by-product from another process.

For more detailed information:

Wood Vinegar - Food and Fertilizer Technology Center

Wood gas vehicles: firewood in the fuel tank

Disclaimer: Always do your own research! The statements made regarding these products have not been evaluated by the Food and Drug Administration. The efficacy of these products has not been confirmed by FDA-approved research. These products are not intended to diagnose, treat, cure or prevent any disease. All information presented here is not meant as a substitute for or alternative to information from healthcare practitioners. Please consult your healthcare professional about potential interactions or other possible complications before using any product. The Federal Food, Drug, and Cosmetic Act requires this notice.