In this quote, the friar is saying that good and bad qualities may not be as cut and dried as might be assumed, and that good can turn into bad and vice versa.
The friar is ruminating at this point on the properties of the various plants and herbs he is gathering, observing that a plant not yet fully grown has the potential for both good and bad: 'Within the infant rind of this weak flower/ poison hath residence, and medicine power'. He applies this to human beings also. In essence what he is saying is that living things all have the potential for good and also harm. It really depends on how these qualities are used. If virtue is 'misapplied', that is to say used wrongly, it becomes harmful. Conversely, vice might blossom into something good, given the right circumstances, as a previous answer stated.
As observed in another answer, this analogy can be applied to Romeo and Juliet. Their love is a sweet and positive thing to begin with, all the more so when contrasted with the long-standing hostility between their respective families. However, they let their love dominate them too much; they end up with a surfeit of it.
The human tendency to intemperate emotion (seen in both the love of Romeo and Juliet and the hatred that otherwise prevails between the Montagues and Capulets) is probably what the friar also has in mind when referring to a flower:
For this, being smelt, with that part cheers each part;
Being tasted, slays all senses with the heart.
The friar is hinting here that it is all right to partake a little of something, but to indulge it too much can be overwhelming and even fatal, as the young lovers' passion proves to be. When they only have a whiff of love, it brings them happiness, but once they actually taste it, indulge it, it becomes too much and overcomes them; it 'slays all senses'.