The Milk bottle only serves one purpose and has the exact same functionality as a bucket of milk, to remove any status effects currently present on the player.
The Milk Bottle belongs to the Noel collection and does not have a prerequisite to unlock it's recipe. The Milk Bottle has a cheap cost to craft requiring:
When crafting The Milk Bottle, the Bucket used in the recipe will be returned upon crafting.
Despite The Milk Bottle being crafted in the crafting table or player's inventory, it can be used in the Brewing Stand to make The Milk Bottle into splash potions.
Trying to further brew Milk Bottles into lingering potions does nothing and the splash effect is kept. This ends up wasting the dragon's breath used in the brewing process.
Milk Bottles when turned into splash potions are great for tight situations where a bucket of milk would otherwise be too slow to consume.
Milk Bottles as splash potions are also a great item to have for adventuring parties where status effects may become a hazard as one splash potion will cover multiple people.
This also ends up taking up less room than having buckets of milk for everything in the party.
Milk Bottles as splash potions are also a method to cure certain status effects from mobs if for any reason the player needs to remove a status effect from a mob.