Jack O' Melons are used as a decoration during Summerween. They're similar to a Jack O' Lantern, except they are made from watermelons instead of pumpkins. In the summer, the Gravity Falls residents light up Jack O' Melons for the holiday of Summerween.
Traditionally, Jack O' Lanterns are made out of pumpkins. Yet, for Summerween, Jack O' Melons are made with watermelons, hence the name. The first Jack O' Melon displayed in the episode, Summerween, was the one held up by the Summerween Trickster, in which he used to threaten the gang. The remaining Jack O' Melons are seen throughout the town of Gravity Falls, where residential homes are decorated with them in spirit of the holiday. The last Jack O' Melon seen is at Old Man McGucket's house, in which Grenda steals it from him forcefully to prevent the last Jack O'Melon from being blown out (though this effort fails in the end).
Jack O' Melons resemble Jack O' Lanterns, yet the object used to carve are different. Lanterns use pumpkins, which are orange in complexion, while watermelons are more grayish-green in appearance. Watermelons also do not have a black stem sticking out of the top of it, unlike pumpkins. The final difference is the equatorial distance between the two. The pumpkin does not stretch as far at the equator as the watermelon does. In fact, the size, shape, and possibly even the weight of the two differentiate between each other.
The only similarity between the two during the holiday is that a candle is placed inside of either of the two after either are carved.