It is a combo expansion and overflow/recovery tank. It connects to the rad cap neck overflow relief fitting. Cold, the rad should be completely filled and the tank filled to the hose connection (because they did not put it on the bottom for some reason) and no higher with a nonvented tank cap. When the radiator relief valve opens allowing flow to the tank, the air in the tank compresses. There is no minimum level to maintain in the tank because it is under pressure to return except what is below the fitting.
If you've already drilled the cap to vent, it works like a traditional overflow/recovery tank.
A non-syphon return due to a leaking cooling system will not overflow the unvented tank. A traditional overflow/recovery (or if you drilled the cap) will overflow. It's just another way to do it.