That would be a starter solenoid. Basically, when you push whatever you have for a starter button, it triggers a relay within the solenoid body to allow current to flow to the starter. Not sure where yours came from, but the wiring concept is the same as what was used on Hs and Ms.
Originally, your starter would have been actuated by a rod, similar looking to your choke rod, which, when pulled, would pull a cam down and depress the starter switch, which was a button mounted on top of the starter. What looks like the hot wire from your battery and the smaller wire probably back to your ammeter on the left-most stud in the picture would have been mounted to the top of the switch body, with the very simple, normally-open switch closed by pulling the rod making the necessary contact for turning instead of the solenoid. Could be any number of reasons it was replaced with a solenoid -- failure of the original switch, wanting the convenience of a push button at the seat instead of the pull-rod . . . who knows?
You can't rule out the solenoid being the source of your short, but if your starter is behaving normally, I'd look elsewhere first.
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