It says that I can use it to steady an tool, but it doesn't appear to make any difference as far as I can tell, and interacting with the cracked wall does nothing. 

A pickaxe or bomb can destroy walls with cracks.

If you have a knife and are restrained in such a way that you can't properly hold a weapon, going near a crack causes you to put it in the crack, which allows cutting your restraints.

For example, I used a straitjacket on myself then went near a crack. When I highlighted the cutting option, it said "You use your feet to place the knife into a crack!"

I didn't even know this! I thought it was like sharp edges where you just stand near the thing and it helps with removing bondage in a particular way. I didn't know you could interact and actually place things.

Functionally, it is just "stand near the thing and it helps". There's just a condition to it being necessary.

It seems to work like a tile bonus, similar to the "corner" effect if you are adjacent to a chest, door, or goddess statue. I believe if you have a knife equipped, but your hands are bound, you get a bonus to the "cut restraint" action that isn't quite as big as if your hands were free, similar to how the corner gives you a struggle bonus when your hands or arms are bound.