This card can be searched by A Cat of Ill Omen from your deck.
It manipulates the Monster Type on the field which certain themed decks may benefit. E.g. Declare Thunder-Type then use Makiu, the Magical Mist and Declare Dragon-Type to increase Buster Blader's attack.
Your opponent might be running a deck that benefits with the Monster Type that you declared.
Cons
Tips, related cards, skills
Destroy them all!
Declaring all monsters into a certain type, will allow you to use cards that destroys all monster of that type. Cards like Eradicating Aerosol and Breath of Light are examples of such cards. It's important to remember that using these cards will also destroy your own monsters.
There are a lot of potential combos by using DNA Surgery, but its main problem is that you can only obtain 1, and getting it early in a duel can be a problem. You can get 2 copies from leveling Ishizu, which can be used to get DNA Surgery from your deck easier.
No, you CAN choose psychic. Its currently the best use of this card I can think of. Declaring psychic also helps on mitigating Destructotron's self-destruct effect and allow Psychic Reactor to be used as a surprise trap... In theory at least.
The fact that we only get 1 of this card make it inconsistant though
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