It's a residual pressure valve. What it does is hold a small amount of pressure in the hydraulic system, so the caliper pistons don't get pushed away from the rotor when the spindles flex.
If you take it out entirely, the hard line to it (from the MC) won't fit right. But I disabled my RPV many years ago, as it also makes the brakes drag a bit. The only ill effect is a low brake pedal after 'spirited' driving; which can be disconcerting if you aren't expecting it and might be a problem on a race course. But it only takes a quick pump of the pedal to get the brakes back.
TRF sells a spacer kit, designed by the late "uncle jack", which IMO is a better solution to the spindle flex problem.
PS, here's what the RPV valve looks like disassembled: