From the flip-up cap and red pushbutton, it looks like an IZLID infrared laser pointer/illuminator, but I can't find the exact model that you've pictured.
Basically, think of it like a big laser pointer, but instead of a visible laser it uses a near-infrared laser that's invisible to the naked eye. It shows up great when using night-vision devices, though.
One example of how they're used is in air strikes. A Forward Air Controller (FAC) on the ground can use the pointer to designate a target for the incoming strike aircraft, essentially saying "hey guys, bomb this thing I'm pointing at!".