Poison is shot at the enemy. If it hits, the enemy is weakened by the poison, losing much of his fighting power. However, many creatures are immune to this spell, and often enough, the poison won't hit or have no effect at all. Therefore it is a weak and only rarely useful spell.
The Green potions fulfill the same purpose as the spell.
Note that the spell Poison Wind is a much stronger version of this spell which can effect entire groups of foes, thus being much better suited for the task.