So there ought to be another part with a hook or needle on that actually went back and forth through the material. I'm interested in this since making wool rugs was a hobby of my great grandfather, and we had a rug in the playroom as small children with a teddy bear design he had made....
I couldn't find a tool that looked identical, but there is a fascinating talk about the history of tools for hand-tufting by Michale Heilman
here. Some had hand cranks and some went back and forth with a sliding motion. But it could date from anywhere from 1900 to 1970s.
This stylised image may show something similar in use:
source