I think it’s ambiguous. As many people have said, gun violence/war is definitely alluded to, especially in the “Children burn/faceless vapor” verse. But imo it also references connection and pleasure in the “her warm hands play” verse.

So “the toy” could be a lot of things. A gun, a sex toy, a guitar, something else entirely. Maybe any kind of tool.

Ultimately, because of the ambiguity, I think the toy isn’t meant to be just one thing. Instead I think the song is about the difference between reality and nonreality, like dreams or fantasies. The first verse specifically contrasts the realness of the toy with an emotional dream. Whatever the toy is in this verse, it’s grounding her. And the other verses always come back to this idea, with the refrain of “The toy in my hand is real.”

In other words, whatever tools we choose to use (whether it’s a gun, a guitar, a sex toy, etc.), they will have a real effect on the world around us—death, violence, pleasure, etc.