It makes tufted rugs. You run thick rug yarn thru the wire thingy at the top, then thru the eye. You then punch the needle thru a backing fabric, like burlap, working from the back of the fabric. Then you withdraw the needle leaving a loop of yarn on the right side of the burlap. The red circle controls the length of the tufted loop you create. When you are done, you coat the back of the item with rubber cement to keep the tufts from pulling out.