what is this piece for

I second post #12. The little one inside the distributor protects the points. You might get a little more powerful spark without it, but the points would burn up sooner. Personally, I wouldn't run a points ignition in a driver car today, and even converted my 1969 Dart in 1989.

The bigger one on coil+ keeps the sparking from disturbing +12 V in the rest of the car. AM radios are particularly susceptible to noise. Modern radios already have power filters.