Franzreb and Williams at Arizona State University detected recently the MgO2+ molecular species in the gas phase. Here we report a very detailed theoretical investigation of the low-lying electronic states of this dication including their potentials, spin-orbit, rotational and radial couplings. Our results show that the potential energy curves of the dicationic electronic states have deep potential wells. This confirms that this dication does exist in the gas phase; it is a thermodynamically stable molecule in its ground state, and it has several excited long-lived metastable states. The potential energy curves are used then to predict a set of spectroscopic parameters for the bound states of MgO2+. We have also incorporated these potentials, rotational and radial couplings in dynamical calculations to derive the cross sections for the charge transfer Mg2+ + O -> Mg+ + O+ reaction in the 1-10(3) eV collision energy domain via formation-decomposition of the MgO2+ dication. Our work shows the role of MgO2+ in the Earth ionosphere and more generally in atmospheric processes in solar planets, where this reaction efficiently participates in the predominance of Mg+ cations in these media compared to Mg and Mg2+.