Again, in the words of the creator:
The Faded Stone is like the rocks that give you special techs. This rock would give a triple tech to Frog, Crono, and Magus. The tech is called Fade Away; when you use it, Chrono does Luminaire and Magus does Lightning 2 at the same time, as the attacks start to slow, Frog leaps in and stabs all the enemies. On to where you find it: On the Black Omen, while you're fighting Zeal, use Charm on her, she will give you things like speed tabs a few times, then voila, a faded stone! This would be a normal stone with scratchy spots. The description gives no clue as to what it does, only that it seems to react to Magus, Crono, and Frog.
There would probably be other ways to find the Faded Stone, but the attack Fade Away is pretty cool.