The pepper gun is extremely useful for non-lethal players in combination with the baton or the riot prod. When an enemy is affected by pepper spray, they'll be stunned, which means they take four times the amount of damage they usually would. A single strike from these weapons will do far more damage than usual because of the target being stunned, making them very effective. Since headshots from both the baton and the riot prod only do standard damage, using the pepper gun is one of the few ways (the other being the riot prod) to do good damage with these weapons.
Non-lethal players can also combine the pepper gun with the mini-crossbow. A stunned enemy will quickly be knocked out if a tranquilizer dart hits them.
Players using lethal force can also use the above trick, but since the headshot multiplier for attacks is double that of the stunned multiplier, it's better to simply headshot enemies instead of using pepper spray to stun them.
Briefly fire the pepper gun at foes in order to conserve ammo. A small burst is enough to stun an enemy.
Walking into a cloud of pepper spray will hurt the player. Be careful.
It can also be used on certain laser-beam tripwires to bypass them without triggering them: the spray can block the beam without triggering the security device, allowing the player to crouch, spray, and slide past undetected. Unfortunately, only a minority of triggers are susceptible to this trick and there's no way to tell which ones without risking setting the trap off.
The pepper gun also works on enemies wearing glasses (i.e. NSF terrorists) possibly because the spray distorts their vision.
According to the weapon description, the pepper spray may cause blistering as well as blindness. That means they are breathing in a nasty blister agent when you spray them. That would explain their coughing fits as well as the gas' ability to affect goggled enemies.