This is a handle used for opening swing doors. All doorknobs in T1 and T2 are of the same design; a short lever with a large keyhole near the base. When a door is being picked open, the knob rotates to indicate how much progress has been made.
Spare knobs can be found in various missions, usually in storerooms and supply closets, but serve no purpose other than distraction. This and other junk items (see Sword Hilt, Lever Handle, Gear) can be made using the Smelting Cauldron in St. Tennor's in Return to the Cathedral.
A limitless supply of knobs can be seen being produced in Soulforge Cathedral falling from a conveyor belt into a pool of lava.