If placed on the ground, pumpkin lanterns give light and protect the characters from Charlie. But if your inventory is full and let you fall the pumpkin on the ground, it appears lighting, but you still get the sanity drain and Charlie attacks you.
This way you can actually see how Charlie attacks your character, pretty funny.
Edit: added screenshot.
- wait for night
- fill inventory (with sticks for example) and hold pumpkin lantern with cursor
- let the lantern fall (by right clicking while holding it with the mouse)