It only absorbs energy based attacks like Zelda's Din's Fire, Samus and Mii gunner's charged shot, Mega Man's forward smash, Lucario's aura sphere, PK Fire/Flash/Thunder, ZZS laser gun, Fox/Falco's blaster, Pikachu's static, Mario/Luigi's fireballs, ROB's laser, and Robin's lightning and fire spells. I think it absorbs Pit and Dark Pit's arrows and Dr Mario's pills but I can't remember for sure, I'd also guess that it absorbs Palutena's autoreticle and Greninja's water shuriken but I've never tried. I might have forgotten a few things because I'm just thinking off the top of my head, I don't know of any list
It can also absorb a few item's shots like ray guns and super scopes
Edit: I just tested it a bit and it also absorbs Bowser and Charizard's flame breath, WFT's sun salutation, Mii gunner's laser blaze, and the fire from fire flower and super spicy curry. It also does not absorb Dr Mario's pills, G&W's food, the beam from Shulk's sword, Mii swordfighter's shuriken of light, or Rosalina's star bits. Other people in this thread confirmed it absorbs the Pits arrows and Palutena's autoreticle, and doesn't absorb Greninja's water shuriken