That is a similar machine to the one at the Denny Test Tank Stein, except that on the Denny one the operator sat on a stool while he looked at the ship drawing which was vertical on a board in front of him. As he operated the machine he made a pointer follow the lines of the ship and the machine and its cutter travelled along the model taking the operator and pointer with it. The models at Denny were first cast in wax and the cutter on the machine then cut grooves in the wax model just like the ones in your picture. These lines would correspond to the lines of the ship and the extra wax between the machine's cuts was then scraped off manually to leave the correct hull shape ready for testing. It may be that the model in your picture was also wax rather than wood.