The Molotov Cocktail is an incendiary weapon that is used to set a small area on fire. It is based on the real-life "home-made" Molotov cocktail, which is prepared by inserting a rag into a partially filled liquor bottle, allowing the rag to "wick up" the flammable alcohol or other volatile liquid within. This causes the soaked rag to become flammable itself, allowing it to be lit on fire. Because the fumes from the flammable liquid (which are actually what catches fire, not the liquid itself) are contained within the bottle, full ignition does not occur until the glass container is ruptured, allowing the fumes to escape. This normally happens upon impact of the Molotov against a hard surface, after being thrown.
It can set a group of pedestrians on fire or light a car's engine on fire, causing it to explode. Victims on foot will catch fire and die if close enough to the flames. In GTA2 molotov doesn't set fire, but explodes. Use of the Molotov will normally result in at least a 1-star wanted level. It proves to be one of the most deadly weapons for the player when used at close range. It is one of only two weapons which can destroy a tank, the other being a Flamethrower. In Grand Theft Auto: Vice City Stories the Molotov is more effective and can destroy a vehicle rapidly fast after one cocktail being thrown at the vehicle (providing the vehicle is in the inner circle of the blast) and merely looks like a mini-atomic bomb when dropped that deals enough damage to annihilate people (even player itself) and vehicles.
In Grand Theft Auto: Chinatown Wars, the player can use the touch screen to throw Molotov Cocktails at a distance in any direction. Huang Lee can go to gas stations marked in the radar to fill up bottles of gasoline to use as Molotov Cocktails. A minigame is associated to this with the player using the touch screen to aim the gas nozzle to the bottle and shoving a cloth into the bottle. In the PSP version, however, the molotovs can be thrown with the same button used for most weapons, and the molotov making minigame uses a button combination.
In Grand Theft Auto: San Andreas, when thrown at something like a wall, the Molotov will set alight anyone standing behind it, making it a very effective weapon against ememies behind cover without exposing the player to enemy fire. The Molotov is a very effective and advisable weapon to use in gang warfare since it has the power to take down a large number of enemies or even an entire wave in a single shot. They are not as hard to use as Grenades as their flames spread in all directions.
Saint Mark's, Portland - Inside the abandoned rail tunnel (that runs underneath Saint Mark's) just southeast of 8-Ball'sBombshop in Harwood. To obtain them, simply kill the 4 tramps inside. A Hidden Package will be in the center of their 'circle'.
Liberty Campus, Staunton Island - On the upper level on the north part of the Campus Courtyard next to the east set of stairs. This pickup will give you 10 molotovs.
Molotov Cocktails can be purchased at the back-alley gun shops for $500. They can also be purchased from Little Jacob for $350. Being hit by one on multiplayer is not a death sentence, because you can pause and will not take fire damage while the flames begin to extinguish. However, you can still be killed, stabbed, shot, or otherwise hurt. They can be used from cars, but it is difficult to do so as the Molotov would have to hit the target directly. A couple Molotovs will flame up a car also, while four will set it ablaze, and six will completely destroy it or render it inoperable.
The molotov cocktail makes a brief appearance in GTA V when Trevor Phillips (one of the three protaganists) uses one to burn a down a house in the second trailer. It's location and whether or not it is actually usable during gameplay is still unknown.
Can be purchased at Ammu-nation, however it is unknown how much it would cost as of yet.