Explosive gears are received from Nulodion during the Birthright of the Dwarves quest. During the assault on the Red Axe, they must be placed inside the dwarf multicannons that are firing at the player to sabotage them. The player receives five of these gears, one for each cannon that must be sabotaged.
After a gear has been placed on a cannon, it will explode after a few seconds. This can damage the player significantly if they are standing next to the cannon.