The Campfire is a furniture. It increases the health regeneration of any nearby players within a square 48 block radius, but not as much as a regeneration potion. The regeneration effect does not stack with multiple Campfires. While it does provide light when placed, it does not meet the housing requirement for lighting.
This item can be very useful around the beginning of the game as a way of conserving health potions. The Campfire is also used to create Cooked Marshmallow.
Before 1.2.1, when placing a Campfire on a thin strip of water that went up to the player's ankles, it was possible to duplicate the Campfire. When placing the Campfire, it remained in the water while another Campfire dropped.
On console, Campfires were added before the 1.2 update itself. Due to a decompression bug, having a pre-1.2 campfire on an updated console world will either cause the world to be unloadable (load failure), or cause the world to look almost like a corrupted save.