The non-linear scale implies the gauge is for measuring intensity rather than a physical dimension, and the peep hole and squared top suggest a simple optical assembly is missing.
As the instrument is a pocket tool, it's used by someone walking about. The peep hole suggests she eyeballs the target. Sound and light, hence heat, are perceived by humans on a logarithmic scale. I think it's for judging the temperature of a furnace or flame for making glass, normalising steel, welding, or melting without boiling etc. Possibly confirming a lighting system is performing to specification.
Any sign of anything mechanical missing at the top? If it's a visual intensity gauge I'd expect the control wheel to adjust an aperture between the peep hole and the lens carrier, now lost.
Dave