It could be that the little red lever aligns with the switch in the handle of a drill which has been mounted in the clamp. So when the bracket is slid down, it presses the switch and powers on the drill.
Interesting thought. However the Proxxon drill it came with doesn't have that design. It has a speed control knob/On-Off switch combined.
Also the red lever is only about 1mm thick plastic. Not all that strong. If pressed it will bend and flick off and get stuck behind/ beside the bit it normally seems to contact. If it activated a switch it would be a microswitch. But no drill or powersupply I've found in a Proxxon catalog has any facility to connect a switch.
One thing I noticed on looking at my photos again is the metal rod that can be seen covered in some brown gunk. That ends flush on the top and has a flush nut on the bottom. So it runs top to bottom but seems to serve no function. Nothing slides on it. I haven't tested what the brown stuff is. I assume grease but it isn't nearby as I type.
There has to be something missing. Otherwise it is a mystery all right.