Only an axis soldier, or maybe Wolf, would be careless enough to try to beat someone to death using a hand grenade. This particular hand granade(sic) used frequently by the axis forces in WWII, was also popular in the east for warfare, and in the west as a collectible.
The Potato Masher can be best likened to the 50 Blessings Briefcase in that they possess similar stats across the board: medium-low damage, high knockdown, and fair range. However, the Briefcase has a lower knockdown. Additionally, the Potato Masher's concealment is slightly lower than that of the Briefcase.
The Potato Masher is fairly unique among the melee weapons in that its charged knockdown is actually lower than the uncharged knockdown. This property is also shared with the Arkansas Toothpick, as they both have similar stats.
The Potato Masher is based upon the Model 24 Stielhandgranate. Its in-game name is one of the common epithets used by Allied soldiers for the weapon.
The Potato Masher is in most likelihood deactivated and filled with an inert content, rendering it harmless but could still be used as a club. Regardless, it is still impractical and unwise to wield such a rare and potentially valuable artifact as a crude bludgeoning tool.
"FÜR KARTOFFELMUß" and "VORSICHT TÖDLICH" is written on the charge cap, which translates to: "For mashed potatoes", "Caution deadly".