Press the "Charge" key (V by default) to charge the Philosophers Stone. Pressing Shift + V will lower the charge. There are five charge levels. While holding the Philosophers Stone, right click grass to change it into sand, cobblestone into stone, and leaves or wood to change it from oak to spruce then spruce to birch and vice versa.
The Philosophers Stone has an internal 3x3 crafting grid. By default it can be opened by pressing C while holding the Philosophers Stone. Also by pressing X it opens an enchanting GUI.
There is no crafting recipe.