Rex,
 That is a Trav-a-dial. Think of it as a poor man's DRO. 
The modern version is here:

http://www.brookanco.com/products1mt.asp?CATID=3&SUBCATID=24&PRODID=88

 They used to sell these in the Enco catalogs and such.  It gets
attached to the carrage and is pressed against the side of a lathe bed
by the spring. The serrated wheel digs in and counts off the distance
the carrige travels. The scale is read vernier style. 
IIRC they where fairly pricey, over $100.00 but I could be wrong on
that.

-AL