How to obtain
Warmworm Teeth can be obtained from Warmworms of course, either by killing them and looting their Loot Bags, or by taming them, then feeding them their favorite Food as Pets and afterwards harvesting from them.
Since October 24th, also Wraithworms and "W'urm The Infernal" will provide you with Warmworm Teeth - but only as Pets that can be tamed during the Halloween event Pumpkiru's Candy Campaign. During this campaign, Wraithworms can randomly be "summoned" by placing either Haunted Idols or Infused Haunted Idols, and "W'urm The Infernal" can randomly be "summoned" by placing an Unleashed Haunted Idol.
Ordinary Warmworms are aggressive, but immobile Creatures that spawn on the Stalactite layer and also on the Lava layer underground, on Siltstone, Hardened Lava, Igneous Rock, Tourmaline, Sulfur, Diamond Nodes and other blocks of these two underground layer. They can occasionally spit lava-fountains and inflict fire damage over time.
Warmworms will only spawn in darkness, but they can withstand sunlight. If you tame them to become your Pets, they cannot follow you through any common means, because they are rooted in the ground.
Warmworms will always drop at least one Warmworm Tooth (or up to 3) in their Loot Bags with Warmworm Teeth in them when being killed by players, or also when drowning, being corrupted, poisoned or when freezing to death. They are sunlight-resistent Creatures and immune to fire/burning damage though. Other typical loot and pet-harvest of Warmworms include: 1-3 blocks of Fossils, 5-10 blocks of Tourmaline, 1-2 pieces of Iron Ore and/or 1-5 blocks of Magnetite.
Pets (tamed Creatures) will only provide their owners with their best harvest after being fed their favorite type of Food as can be seen in their Pet window (to be opened by clicking the right mouse button when looking at the according Pet). This means that you feed a Warmworm Pet with Wholesome Sandwiches if the Warmworm's favorite Food is common Sandwiches, then you might not be able to obtain Warmworm Teeth when harvesting from this Pet afterwards.
Warmworms might either prefer to eat ordinary Breads, ordinary Soup or common Sandwiches. If you feed them their favorite food, you'll get the same materials as a pet-harvest like you would get from their Loot Bags when killing them in principle (only in different amounts). Pets with modest eating habits will not provide you with any less or worse pet-harvest than more demanding Pets.
Since October 24th, the Halloween event Creatures Wraithworms and "W'urm The Infernal" can now be tamed as well. These immobile red ghostly event Warmworms only desire Pumpkiru Candy as their favorite Food and will then both provide you with the exact same Pet-harvest as common Warmworms would.
How to use
Warmworm Teeth are required as ingredients to craft Freeze Resistance Potions, Diamond Swords, Medieval Swords, Iron Swords, Iron Armguards, Iron Breastplates, Iron Pauldrons, Iron Leggings and/or Fire Bombs for example.
All of this can be crafted in your Crafting Menu (to be opened by pressing "q" as the default key), after these crafting recipes have been unlocked (all of them for free except for the Medieval Sword that is part of the Store-exclusive Medieval Super Bundle).
Warmworm Teeth cannot be processed or forged.
Animal materials cannot be put into your quickbar, cannot be used directly (can neither be consumed nor thrown) and cannot be placed into the game world.
They also cannot be put on display in the slots of display containers like Placemats, Stone Wall Shelves, Hidden Temple Altars, Galactic Grav-Chambers, Frozen Containers, Holiday Decorative Trees, Snow Buried Containers, Wood Planters, Flower Pots or the like.