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Noobie- Where does this part fit into, pics included

1978 mercruiser 120 hp- I am installing new seals throughout the stern drive till i came to this part. I checked to see where this part fits into but i see nothing in the drive but a hole? Does this part connect to anything or does it just slide in this hole?boatpic.jpg
 
Taking something apart without a manual and not knowing what does what ,leads to trouble
I have two manuals "shop manual" and they both do not say much about this part. Seen plenty of people on here with manuals asking for help. The problem i was having is that this part seemed to be connected to something, guess not. Ill stick in back in the hole like docksidemarineservices said. Thanks for your assuming reply but it was not helpful.
 
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