The Speed item resembles a winged boot. Upon activation, it increases nearly every action of the hero using it. Movement, shot speed, melee attack speed, all increase in tempo; it also stacks with every other item. As such, it's valuable to have when fighting tougher monsters such as Golems and Gargoyles and various bosses. They are very useful for slower heroes when collecting Coins in Treasure Rooms, to ensure that all the coins are found before time runs out.
Extra Speed Potions provide a permanent speed boost, but are only found in earlier adventures.