The object in the image is a German "Smoker" or "Räuchermann" (incense smoker). These wooden figurines are a traditional Christmas decoration from the Erzgebirge region of Germany.
Key information about German Smokers:
Function:
They are designed to burn cone incense, with the smoke typically emerging from the figure's mouth or pipe, creating a visual effect of the figure "smoking".
Origin:
They originated in the Ore Mountains (Erzgebirge) of Germany, a region known for its rich tradition of wooden folk art

German Smoker Rauchermann Incense Burner Wood Hunter Figurine Vintage 5.5”