2Dropped by
where it comes from
Voodoo Demons in the Underworld always carry one, and they are the only source. There is no recipe, which is unusual for a pre-Hardmode summon; the Clothier Voodoo Doll is in the same small group. The demons are uncommon enough that plenty of trips through the lava layer go by without one appearing, so bring a Battle Potion rather than hoping.
three conditions, all of them required
This is not consumed from the hotbar like other summoning items. You drop it, into lava, in the Underworld, while the Guide is alive. Miss any one of the three and it is wasted. Burn it in lava anywhere else and you have killed your Guide for nothing. Burn it with no Guide in the world and the doll is simply gone. When all three line up, the Guide dies on the spot and the Wall of Flesh wakes up.
split the stack first
If several dolls burn together, the game kills extra town NPCs to match how many went in, and you still get exactly one boss out of it. There is never a reason to throw more than a single doll. Pull one off the stack before you go anywhere near the lava.
wearing it does something else entirely
Slotted into an accessory space, it makes the Guide killable by ordinary attacks, which normally bounce off him. That covers your own weapons and everything hostile in the world. It is the clean way to be rid of a Guide you want replaced, and a nasty surprise if you forget it is equipped when an invasion arrives. The doll cannot be reforged either, so the slot costs you a modifier on top.
one Wall at a time
A second doll will not produce a second Wall of Flesh while the first is still alive, even if a replacement Guide has already moved in. If an attempt goes badly, the spare doll is for the next try, not for stacking bosses on top of each other.
the town knows
Before the Wall is beaten, several residents hint at the method without spelling it out. The Arms Dealer mentions wanting to put a few rounds into a doll that looks like the Guide, the Nurse wonders why he keeps coming in with lava burns, and the Guide himself talks about a living sacrifice and about everything you need for it being down below.