Hello, Mark -
This is a very interesting piece. While its use is uncertain (imaginations certainly do run wild with these types of pieces), it is in all likelihood a magician's gaffe, or illusion, coin or perhaps incorporated as a piece of jewelry. The coin did not come from the United States Mint this way, nor is the Mint employed in making such pieces. As this piece is altered, it has no numismatic value, but it might be worth $5 to $10 to a novelty collector; I can tell you that such craftwork will sell for a few dollars.
Great piece, sir! Thank you for your question!
Josh