That looks like your tstat for your trans. Its function is to route the trans oil back to the trans until trans is up to temp, once the design temp is reached the block will route the trans oil to your trans cooler. Confirm this by tracing the forward running lines, if they connect to an oil cooler either in your coolant radiator or a stand alone cooler, then it most likely is a thermostatically controlled bypass block. This can be removed if one so chose, depending on trans operating temp.
My problem with the my block was the design temp was too hot for my liking, 170F or 180F, but from there my trans temp just went up, higher the load, higher the temp.
RevMax and a couple others make a 'tstat delete' block that is straight through with no thermostat, straight to the cooler all the time. I chose this route for my trans.
I paid $100 for a straight through block, and I wouldn't do it again, the new block was .5" shorter than my OE block which made it a total pita to install. If I could do it over, and I probably will, I will run new lines with -AN fittings from my trans to the original cooler. There is a line kit available online 20ft of braided hose and at least eight -10 AN fittings for $90 ish, a kit with less hose is available and less expensive. I had to adapt the -10 AN to a -8 AN for the trans. This was all to install a aux cooler, I still have the RevMax in place. boo
A person could just jump the block out with a couple appropriate sized pieces of hydraulic hose and clamps / -AN fittings, but I prefer fewer connections if i can.
-AN can be super smooth and clean, I do recommend them over a hose clamp (although I have a dual stainless steel clamp connection working perfectly well). Don't over tighten the -AN if you chose to use them. Too tight and they will leak.
The decision to remove is between you, your trans and its operating temp. I'm lowering trans temp to 140F every chance I get. Mine dropped 30F to 40F when I removed mine.