From the Super Mario Wiki, the Mario encyclopedia
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The Monster Pill is a recovery item. Upon being used, it will remove all bad conditions from the user's kart, such as square tires, burst tires, or Thunder Cloud. In addition, the Monster Pill provides a shield for approximately half a second upon being used. With good timing, this can be used to block incoming items or be immune to the explosion of a Time Bomb.
In Mario Kart Arcade GP, a variant of the Monster Pill known as the Monster Pill+ can be unlocked. This variant greatly increases the duration of the shield the item provides.
The Monster Pill looks identical to the Power Pill apart from its color. Despite the similarity, the two items have different effects.