A Molotov, also known as a petrol bomb, is a bottle filled with kerosene. Once it makes contact with an enemy or surface, the affected area will ignite and burn for several seconds. It can be first found in a Remnant base in St. Louis.
The Molotov serves as a substitute for the Air Fuel Grenade but inflicts less damage than the Air Fuel Grenade. However, the Molotov doesn't require timing due to exploding on contact.
The following quote can be seen on the Molotov Intel document: "There are many towns, cities and villages that have been saved thanks to the Molotov cocktail.". This indicates that the Molotov is a very useful and popular weapon amongst survivors.
Molotov cocktails are probably made by Remnants since Air-Fuel Grenades are in short supply.