Gives Isaac an extra life. Upon death, Isaac respawns in the current room with half a heart left, a massive size down, and +0.2 speed.
If Isaac has any heart containers, he will respawn with half a heart container filled; otherwise he will respawn with half a soul heart.
When Isaac respawns as the inner child, he emits a blood explosion that deals 35 flat damage to all nearby enemies.
Notes
The extra life granted from this item takes priority over all other items except Dead Cat, Lazarus' Rags and 1up!.
Once this item has been unlocked, if you have unlocked a character's tainted version or are playing as a tainted character, it is guaranteed to spawn in the hidden closet in Home.
Despite being hardcoded not to appear anywhere else for him, this specific occurrence of Inner Child will still spawn for Tainted Lost.
The size down from being revived by Inner Child is the same as if Isaac had collected Pluto.
Since Isaac respawns in the current room when being revived by this item, he can use Plan C in conjunction with Inner Child to kill bosses that otherwise have death animations too long to live through, namely Delirium and Mother.
In-game footage
Trivia
Inner Child is a concept in popular psychology that there exists an "inner child" in every sub-conscious that contains memories of pain and trauma in youth.
Dead Cat, 
Revival Items 
Jacob and Esau Unlocks 
The Binding of Isaac: Rebirth
