Whatever it is, it’s not doing anything for you. A left over from a previous mod, it looks like they took whatever preamp they put in there and left the battery and led power indicator.
Check the ground wire under the bridge and make sure it is still intact and making good contact.
Does the noise increase when you aren’t touching the strings and decrease when you are holding the strings? That’s a grounding issue. The crappy solder blob might be part of the problem.
View attachment 5358388
It should look like this.
Should be a fairly easy fix if you can do better soldering than the last guy. Dingwall has replacement switches with easy screw clamp connectors. No soldering needed.
check with Fretnation.com.