I believe it was a gravity well generator used as an extreme measure by Bao-Dur & the Exile. When it was activated, many Mandalorians & Jedi were crushed to death as a result. This also distorted Malachor V's appearance.
Because so many Jedi were killed as collateral damage, this permanently scarred the Exile & Bao-Dur emotionally and caused the Exile to disconnect from the Force.