This is a decorative redstone device, intended for use in a factory setting.

The machine simulates the production of a product item from ingredient items inside a process chamber.
The machine drops ingredient items into a water stream, which moves the items into the central "process chamber". The chamber closes, a "stomper" block comes down, and the ingredients vanish from sight. When the "stomper" goes up again the ingredients have been replaced by a product item. The product is removed from the process chamber using the water stream again.

What happens is that the lowering and raising of the stomper creates an item elevator that removes the ingredients from the process chamber. The ingredients are being put back into their initial dropper, while another dropper ejects the product item into the process chamber. Upon removal from the chamber the product item gets returned to its dropper, too.

The test world contains a Craft-O-Matic with outer hull, a version where most decorative blocks have been replaced by glass and a bare-bones model to see the operation. The world includes NBT-files for all three of these, as well as an instruction manual.