What we're talking about here is a ducted crankcase breather, which was on all California cars (from all makers) starting from 1964 model year, and all cars in the other 49 states starting from 1968. The reason why it's there is simple: gas flow outside → crankcase → PCV valve → intake only works when there's enough manifold vacuum. Stomp the accelerator or go up a long hill and manifold vacuum drops off, so crankcase fumes flow out the breather and into the atmosphere (and into your lungs, koff). The ducted breather ensures crankcase fumes wind up in the intake tract no matter which way they flow.
Now, with a ducted breather, if the engine's a whupped pony with lots of blowby or the
wrong PCV valve is installed, you're going to oil down the air filter. This can be worked around by installing the right PCV valve or rebuilding the engine as necessary (duh); short of that, if you have to have a ducted breather—or you want one because you'd rather not smell crankcase fumes—but you need time before you can fix the motor properly, you can put together an air/oil separator with a jar, some metal scouring pads, some bits of pipe, and some fittings.
