The Amnesia Drink was used by Alexander and Daniel on the prisoners brought to Brennenburg Castle, to make them forget the terrible pain of the torture sessions carried out to harvest Vitae. The amount of Vitae extracted depends greatly by their "performance" but the most important thing is to instill as much terror as possible in the victim. The victim, if tortured once and again without the drink, would become accustomed to the pain and Vitae production would slow down, or even halt. The victim is thus given this drink, making them forget the horrors of pain they were forced to endure, and thus, would be tortured anew to maximize Vitae production, to make it up for the difficulty to obtain 'human vessels' as Alexander noted in one of his notes.
The Baron had Daniel perform terrible acts on his fellow men because he insisted it was necessary for a 'blood-warding ritual' to distract the Shadow that was chasing the young man, and with it buy precious time to permanently banish the living nightmare. Daniel complied as he believed the prisoners were all evil-minded criminals, but perhaps, and more importantly to save himself. Although he threatens to kill Alexander when he discovers that he has been tricked into murdering countless innocents as he states in one of his notes that he became a murderer himself, the very type of people he was willing to sacrifice. As the events of the Dark Descent unfold Daniel's confidence in Alexander is shattered when he murdered an escaping young girl who he thought would jeopardize the ritual.
Having acquired all the vitae he needed, and seeing the event had devastated Daniel's psyche, Alexander abandoned the young man to the Shadow. On the stormy night of August 19th 1839, Daniel swore revenge, but was unable to cope with his crippling fear of the guardian and the terrible guilt of the warding rituals. He realized he could only hope to redeem himself and avenge the fallen by wiping away his awful memories altogether with the mixture.
Daniel managed to acquire a vial of the substance and fled to the Old Archives. He wrote a final note to himself to end the Baron at all costs and then drank the tonic. Daniel tried repeatedly to remind himself not to forget to stop Alexander, but the solution was purging all his memories from his mind and he realized the irreversible consequences of what he had done.
As he stumbled all he could recite was his name was 'Daniel' until at last he passed out in the Rainy Hall.
It had gone too far. The man was suffocating as he could no longer breath properly between the lashes. Displeased, he started to look for the Damascus rose oil.
Occasionally, Daniel will say: "That taste... That fragrance... Damascus Rose."
It is also revealed in a flashback that a prisoner realised he had been made to forget his torture, and that the rose oil was involved, as he woke with marks on his body and the smell of Damascus Rose on him:
Prisoner: I know this. I’ve been here already. I know this taste – the taste of Damascus Rose obfuscating the truth in a dim haze. They may sweep the traces from my memory, but my body remembers. These cuts speak volumes, even though my mind remains silent. They will be back. Oh, they will be back.
Also a passage in the short story Old Friends hints at the rose: “Careful with the rose flavored ones, they are said to ease your mind, but also make you forget things.”
The damascus rose oil is used in perfumery and doesn't have any known amnesia-inducing properties. Probably the rose oil just give the potion its flavour and taste and the amnesia is caused by other unknown ingredients. The liquid has a thick consistency, a strong taste and is apparently pink as the trail in the beginning of the game shows.
- With Daniel there were some memories and fears so embedded into his identifying characteristics, that even the tonic could not destroy or remove them. He could not forget his own name. Daniel's intense fear of the dark, his nyctophobia remains. Daniel also remembers exactly how to rebuild a broken Orb, apparently the nightmares that taught him how must have fundamentally changed the young man in some way, meaning they cannot be purged or forgotten.
- It is unknown precisely how many of his memories were purged, or even if he remembers anything about his life prior to the events of the game.
- Since the amnesia mixture leaves whoever consumed it completely incapacitated and vulnerable, Daniel may have taken it far away from the Inner Sanctum and intentionally fled to the remote Rainy Hall. As he knew all too well The Shadow was already after him and Alexander's servants, the Gatherers would soon turn on him for threatening their master. The old hall was boarded up and abandoned because it was a weaker structure in the castle and feared that such sections could collapse under the approaching Guardian of the Orb. Daniel may have thought this hall, lacking enemy presence, was the safest place in the castle he could take the tonic without being attacked. This does not seem to apply in the demo, however, as the hall is right next to the Refinery which contains at least a single Grunt.
- Given Daniel's motives and memories near the end of the game, it could be possible that Daniel has regained most or all of his former memory by the time the game ends. This could explain why Daniel still acts the way he does even if the player chooses not to read any notes or diaries during the game.