A fire extinguisher was a tool used to put out fires with the use of some sort of fire retardant material.
Shortly before the Battle of Yavin after escaping from the first Death Star, R2-D2 put out a small fire that was started on the Millennium Falcon after it took several hits from pursuing TIE fighters. A few years later, he again made use of his built-in extinguisher while on Cloud City. This time it was used as a smoke screen to blind the stormtroopers that were chasing them.
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