To use the Rainbow Wing, you need to have it in your inventory. Then, you need to fly to the Tin Tower (at the northeast corner of the Johto region). Once there, go inside the tower and make your way to the top. Ho-oh will be waiting there.
When you encounter Ho-oh, it will be at a very high level and is very powerful, so be prepared. If you defeat it, you can capture it like a regular Pokemon.
The Rainbow Wing can also be used to change the appearance of Lugia. If you have Lugia in your party and you use the Rainbow Wing, Lugia will become shiny. Shiny Pokemon are rare and have different colored appearances than regular Pokemon.