You need to use all the kinds of incense before the tier you are using as well. It will then infuse your knife and the next time you use it you sacrifice 90% of your health and depending on your level of incence will determine the amount of LP you will get.
You need a braisier for each teir of incence you need.
So if you are using the blue incence you need the red AND the yellow one active as well in their own braisier.
As far as how many uses you get I can't really be sure.
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