This is an icon that directly opens the settings for whatever live wallpaper is currently running making it easy to quickly tweak a live wallpaper without having to navigate a bunch of menus.

It's called "LW Settings" in the app drawer.

For Android 7.1 and higher there are also shortcuts to the Live Wallpaper Picker and the Screen Saver picker available by long-pressing the icon in the launcher.

Live Wallpaper Settings shortcut is open source. You can view it here: https://github.com/CypherCove/LiveWallpaperSettingsShortcut