Magic works much as in other Pathfinder settings. The difference is mostly in specific applications.
Spells in Whymsia work pretty much as they do elsewhere in the multiverse. The exception are a few unique ones due to the nature of Whymsia's particular corner of reality.
Powerful magical items capable of altering the flow of the Plot are referred to as "Macguffins," after the great halfling wizard Polzrand Macguffin, the first person to attempt a systematic study and classification of them. Macguffin's Registry of Magical Artifacts is still a valuable resource, though a full set of it takes up 18 volumes and is a bit difficult to carry around. Macguffins are divided into two categories based on their power:
Greater Macguffins are items capable of turning the entire Plot around themselves. They are usually powerful, ancient artifacts that can destroy, reorder, or otherwise royally mess with the world. Kingdoms, empires, and even gods have risen and fallen with the (mis)use of Greater Macguffins, and the results of some are still visible as some of Whymsia's more notable scars.
There are currently 4,327 known Greater Macguffins of potential world-destroying caliber, most of them in various states of being hidden, lost, guarded, destroyed, or—in one case—sat on by a particularly ancient, irritable, and unobservant old dragon. Usually only one Greater Macguffin is active at a time. It seems that every few months another one turns up, though, either in the hands of an Evil Overlord out for domination or with some heroes out to stop him, so the number is likely an underestimate.
Some examples of Greater Macguffins include both the Eye and the Hand of Vecna, the One Spring, the Tome of Endless Knowledge, the Armor of Omnipotence, the sword Excalipers, and the Well of Dissension.
Lesser Macguffins are similar to Greater Macguffins, but can only affect the flow of Plot in a limited area, such as a single kingdom or even a single town. Their power levels vary dramatically, and there's always dispute at the low end of whether or not something is truly a Macguffin or just a powerful magic item.
Examples of Lesser Macguffins include the other parts of Vecna (the Spleen, the Left Pinkie Toe, the Other Eye, and the other 38 items attributed to him), the Deck of Many Things (and its lesser derivatives, the Decks of Several, of Paltry, and of Mini Things), the Pie of the World, the Holy Pail, the Spork of Power, and the Flail of Cowardice.
Given the sheer number of Greater Macguffins floating around, it's inevitable that some of them occasionally get activated, often for the worse. Though the results can usually get cleaned up, the world bears scars from some of the more notable misuses of these artifacts. In theory they serve as warnings to those who would meddle with power beyond their ken, though in practice they end up just being used as landmarks.
- The Eldrich Sea marks the former location of Anteon, the supercontinent whose destruction first clued the gods in that maybe mortals should have some restraints put on them. The sea is still a seething nightmare of eldrich energy, one that any experienced sailor avoids at all costs.
- Remnant of Thousandfold Folly is a massive, circular lake that marks the former residence of a shogun who got particularly power-hungry and managed to turn his palace (and much the surrounding countryside) into a nice crater.
- The Drowned Shore used to be above water, until a would-be Evil Overlord started experimenting with Things Man Was Not Meant To Know and fractured his kingdom into a thousand pieces. Now it’s a veritable maze of channel islands, mangrove swamps, sandbars, and other treacherous sailing.
- The Sea of Glass on the northwest corner of the Great Desert is the most mysterious scar. Though there are rumors about its creation, no one really knows how several hundred square miles of desert got turned into a massive flow of pure, mirror-smooth glass.
Magic items, unlike Macguffins, are generally neither unique nor world-shattering. Instead, they're tools, to be used by anyone who can afford their (often steep) price. Thankfully, many monsters carry magic items as loot, so a few dungeon delves can often get you, if not the item you want, at least enough to sell so you can afford it.
Some magic items in Whymsia are detailed here.