Radioactive Bar is used in the spool of the Sewing Machine with Cloth in the feed to create Radioactive Goggles. It is a lime dye when used in the spool of the Sewing Machine with a dyeable clothing item in the feed. It can be placed in the green dye pot at Emily's and Haley's house for use in dyeing.
Radioactive Bar is not used in any quests.
The description is most likely a reference to the often-parodied California Proposition 65 warning: Known to the state of California to cause cancer, birth defects, or other reproductive harm.