That transformer is being used as a step-up transformer, as in its converting 120 into 220 for the sewing machine.
For your question about potential damage: I doubt any would have occurred.
Unlike digital circuits, motors don't really care about the voltage it is fed - it just makes the motor run a little faster. The motor is set up for 220 volts, the maximum possible voltage available to domestic house wiring.
From what I've seen, As it's set up, I don't think there is a problem.