The Mega Mushroom will make you huge upon usage, also, any Karts you bump into will be squashed. You can also travel off-road without speed loss. It will also relieve you of getting squashed yourself (e.g. getting flattened by a car in Moonview Highway). Although it is impervious to most items, it will still be affected by Bullet Bills, anyone with a Star, and a Thunderbolt (the first two making you flip over like any normal racer, and the Thunderbolt making you return to your original size). It also can lift up a car in Moonview Highway, but it will flip it over like it does with a star.
This item is typically obtained in the middle of the pack.