"Do you really wish to know?" Spoilers from the books and/or adaptations to follow!
A Witcher medallion is a silver symbol of the witchers' profession. Each one is shaped to represent the school a witcher comes from. It is sensitive to magic, vibrating and tugging on its chain when spells are being cast or magical beings, like genies, are present. This magic medallion is given to every young witcher candidate who has passed the Trial of the Grasses. The origin of the first medallions is unknown, though it is assumed they were made in the magic forge at Kaer Morhen. The medallions vibrate in response to magic in all its forms, including curses, charms, and spells. They also warn of lurking monsters born of magic or magic experimentation. However, witcher medallions are not foolproof, certain monsters such as dopplers and higher vampires remain undetected whenever in range of a medallion.
The witcher medallion is not only an insignia of our profession, it is also one of its tools. It has numerous useful capabilities that are accessible, of course, only to one who possesses the necessary knowledge and training. First of all, it reacts to the presence of sorcerous auras in the immediate surroundings, making us aware of nearby spellcasting, active illusions, or magical creatures. It also warns the owner of sudden dangers, thus providing an additional moment to react. Keep in mind, though, that the medallion is not infallible. A very strong magical aura, such as those found in Places of Power or during the solstices, can provoke aberrant reactions. In large cities, where people widely use simple magical amulets or sorcerous alarm systems to protect their homes, coin, or ruttish wives, the medallion can also behave abnormally.
In The Witcher, Geralt's medallion can be tuned to detect either monsters or magic. This particular screen can be found while Geralt is meditating, by clicking on the Inventory icon.
If the medallion is tuned to detect monsters, it will vibrate whenever a monster is near. When the monster is very close, there will also be a red haze around the left side of the screen, and the medallion will vibrate quite violently.
If the medallion is tuned to detect magic, then it will vibrate in the same manner when in proximity to a Place of Power.
Finally, the ring around the medallion in the game interface (upper left corner) shows the icons for active effects and a progress bar for XP.
The medallion emits an audible vibration when in the presence of magic. It can be used when energized, as indicated by a pulsating yellow aura. Using the causes the medallion to highlight items such as plants, monsters, monster remains, and containers in orange, and Circles of Power in red; this function is extremely helpful in cluttered and overgrown areas. Surrounding the medallion are the player's various level indicators:
Vitality – indicates Geralt's health level. Reduction to zero results in death.
Vigor – necessary to cast signs and/or block enemy blows.
Toxicity – increases for the duration of each potion consumed, effectively limiting how many may be active at once.
In the Witcher 3: Wild Hunt, the medallion has a diminished role, being largely replaced by witcher senses, an ability that wasn't present in previous installments of the trilogy. Though it gets mentioned when Geralt talks to someone generating magic such as a cursed being, and vibrates infrequently (whether pointing out a clue or warning of danger) as the player explores the world.
Leo Bonhart boasts a collection of three witcher medallions: a cat, a griffin, and a wolf. After his death in The Lady of the Lake, Ciri claimed the cat medallion for herself, gave the wolf one to Geralt (whose own original medallion was destroyed near the end of The Tower of the Swallow), and the griffin one to Yennefer.
A wolf's-head keychain was part of the packaging for some editions of the original game, with a full replica included in the third game's collector's edition. More of these replicas can be purchased from The Witcher Official Store.