What it does
Pickup lets the Pokémon find items in the overworld — used items left on the ground, items scattered around routes. Each step has a small chance to pick something up.
In competitive battle, Pickup never activates. There are no items to pick up mid-match. It's a blank ability for VGC and Champions purposes.
Who runs it
Diggersby (1%) — rarely seen competitively at all. On the rare occasions it shows up, it runs Huge Power, which doubles its Attack stat and makes it a real physical threat. Pickup is never the reason to use Diggersby.
Dedenne (24%) — more common, but it's running Cheek Pouch (heals extra HP when eating a Berry) or Plus (boosts Special Attack when partnered with a Minus user). Pickup does nothing for it.
How to use it
You don't. If you're building a team and see Pickup on a Pokémon, check whether it has a Hidden Ability or other ability slot — the competitive set will never use Pickup.
Tips & strategy
If you see Diggersby across the field, assume Huge Power until you can confirm otherwise. A Huge Power Diggersby has massive physical attack and is a genuine threat. Don't let 'Pickup' in the ability slot make you underestimate it.