This object was found in the tailor's shop in Colonial Williamsburg. It's used to cut the opening in a buttonhole, and versions are used today by modern tailors and dressmakers. The wedge-shaped edge is sharp, and when pressed down through the cloth makes a clean, neat cut that's almost impossible with scissors (as every frustrated home-sewer will agree.) The wooden block is placed beneath the cloth to limit the depth of the cut, and to protect the surface of the work table.
In the 17th and 18th centuries, buttonholes were used as an important decorative element as well as for closing coats, jackets, and waistcoats. Look again at the riding habit in Loretta's post. All of those gold stripes on the cuffs and down both reveres are worked buttonholes -- there must be over thirty on that single jacket. No wonder this little tool was so indispensable to a tailor!