The Lightning Staff does several things. If used as a Naginata, it does damage based on Agility (4-8 damage)
It needs to be crafted by playing a Lightning Shard on top of a Ancient Staff. The Lightning Staff can't be repaired. If it breaks, you'll have a Ancient Staff back, wich needs to be reinbued with another Lightning Shard.
This staff is capable of summoning lightning from the sky, even if you don't own the Lightning spell.
It enhances any spells that do Lightning Damage- this means that, if you have the Lightning spell, you could hold the Lightning Staff and do more damage than if you would right-click with only the staff. This also greatly increases your Charged Bolt.