From TF2 Wiki
The Napalm grenade was to be a grenade weapon for the Pyro class. Its function would likely have been the same as in Team Fortress Classic, in which it would set a patch of the ground and enemies in the same radius on fire upon detonation, then continue to burn for a short time doing additional damage to those still within its radius and igniting those who enter it. The Pyro carries three (unusable) napalm grenades on his belt.
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