Onion Knight is a Celestial Weapon and it is the most powerful weapon for Lulu in the game.
You must obtain the Celestial Mirror before you can obtain or create any of the Celestial Weapons. Click on the link below for more information on how to obtain the Celestial Mirror:
In order to create the fully powered-up Onion Knight you will need to obtain the Onion Knight weapon itself first, then use the 
Venus Crest and the Venus Sigil to power it up.
You can obtain the Onion Knight after you have defeated Geosgaeno near Baaj Temple. A treasure chest will appear in the southern most portion of the water. Check out the Baaj Temple side quest section for more information on how to defeat Geosgaeno:
The Venus Crest can be found in Guadosalam in the Farplane. It can be obtained as soon as Maester Seymour leaves Guadosalam during a regular play through. Travel back to Guadosalam and enter the Farplane and you will see a treasure chest on the left side of the screen. Open it to receive the Venus Crest.
In order to obtain the Venus Sigil you must travel to the Thunder Plains and dodge 200 lightning bolt strikes in a row. This side quest is also known as the Lightning Dodger side quest. Click on the link below for more information:
Return to Macalania Woods to the area where you received the Celestial Mirror once you have obtained both the Venus Crest and the Venus Sigil. Offer the Onion Knight up twice to fully power it up using both the Crest and Sigil.
The Onion Knight has the following abilities when fully powered up:
Break Damage Limit - Allows Lulu to do more than 9,999 damage in a single attack
Triple Overdrive - Charges Lulu’s Overdrive at triple the speed
Magic Booster - Uses more MP to heighten the power of Lulu’s spells
One MP Cost - Causes all of Lulu’s spells to cost 1 MP (which negates the downside of the Magic Booster ability)
