Spirit Smoke is a precognitive substance. Using what appears to be incense sticks and ashes, it manifests as a cloud of pale gray smoke which creates images of danger in the near future.
Sensei Wu used Spirit Smoke in his meditation before he was interrupted by the sound of the Ninja fighting.
En route to Torchfire Mountain, Sensei Wu was meditating with the Spirit Smoke's aid to see the near future. To his dismay, the smoke showed him images of Pythor successfully awakening the Great Devourer, and his own apparent death. This would lead Sensei Wu to separate himself from the Ninja when Pythor stole the Fangblades, allowing him to personally confront the Serpentine leader and show him the foolishness of his plan, seemingly sacrificing himself when the Great Devourer consumed him and Pythor.