The image inducer was used by the Chameleon. He would wear it around his waist and use it to change his appearance to look like other people.
The image inducer could be worn around the waist like a belt and Chameleon could use controls on the belt buckle to create a holographic image that would surround the users body making him appear to look like another person.
The buckle on the image inducer also had a camera built into it. Chameleon could use the camera to take pictures of people and the technology in the belt could scan the photos and download an image of the person into the belt. The image would then be saved in a storage unit on the belt and by using the controls on the belt, Chameleon could pick who he wanted to turn into.
Spider-Man once damaged the Image inducer causing Chameleon to change forms uncontrollably and electrocuted him which made the Chameleon pass out.
Alistair Smythe later rebuilt the image inducer and was able to get it to Chameleon who at this time was in prison. Chameleon then used the image inducer to disguise himself and get out of his cell and then set free five other criminals who would become the members of Kingpin's Insidious Six.
In the comics
In the comics Chameleon did not use an image inducer, but instead used realistic looking masks to change his appearance. However, a device known as an Image Inducer was used in the comics by the X-Man known as Nightcrawler.
In the comics the image inducer was created by Tony Stark and he gave it to Nightcrawler to hide his mutant appearance. In the comics the image inducer was designed to look like a cell phone. The image inducer from the comics acted similarly to the one shown in Spider-Man: The Animated Series such as covering Nightcrawler in a holographic image to make him look like someone else.