This is a temperature pressure relief valve (TPR valve) on a water heater.
A TPR valve is a safety valve.
If something goes wrong with the water heater (i.e., the water heater doesn't turn Off after reaching the set temperature)... the valve is designed to open when a certain internal tank temperature or pressure is reached... and the hot scalding water under pressure flows out a discharge pipe to the exterior per today's requirements.
In this photo, there's no installed discharge pipe and the TPR valve has been plugged... Defeating the purpose of a safety valve... Not good.
Water heaters can literally become bombs or unguided missles, if the pressure gets too high and these valves fail to work... go here to see what happens when a TPR valve is plugged.
These valves can also begin to leak water (see water stain in photo) because a) the valve has become defective, or b) the pressure in the tank is exceeding the relief point... This may be a defective valve.
When I observe a leaking or plugged TPR valve at the water heater... I listed it as a potential health and safety concern and highly recommend further review by a licensed plumber or water heater specialist prior to the close of the contingency period.
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