O3 is an unstable molecule that acts effectively like bleach, it forces an Oxygen atom/ion onto another molecule. This tends to do significant damage to large hydrocarbons, like those making up our bodies and the cells' internal machinery.

It's produced naturally by sunlight hitting oxygen molecules in the atmosphere, and by lightning. It's also a byproduct of a number of processes, like some combustion engine designs. It then breaks down quite quickly into normal oxygen, either by reacting with something else, or by combining with a 2nd O3 (2O3 ==> 3O2). This has a short half life of around 20 minutes.