Q: "How does this item work?"

I did my best to answer this in the main page, but if you want more detail, here it is:

Upon every death, the game checks to see if you're in a valid room, and have any items of Quality 2 or above (not including quest items). If so, the room you are in is saved as an 'epitaph'. A random item from your inventory (same as before, ignoring quest or low quality items) is also chosen to use as the reward later.

Think of an epitaph as a list of information about your death, bound to the specific floor you died on. A death on Basement creates a Basement epitaph, and a death on Burning Basement creates a Burning Basement epitaph.

When using Flashback on a floor with an epitaph, you will be transported to a copy of the room that you died in to create the epitaph. When you complete it, you will get the reward previously saved on the epitaph.

You can have up to 1000 epitaphs, and if any more are created, the oldest epitaph is instead removed.

Q: "Does this work in Greed Mode?"

Unfortunately no. Greed Mode does not function on a system of rooms, but instead a system of 'waves', which I cannot replicate the same way I replicate rooms unless the modding API is overhauled a lot.

This item, however, will not appear in Greed Mode, so no need to worry about it pushing other good items out of the item pool.

Q: "gungeon reference??????"

Kind of. The description is a reference but nothing else is.