It’s a conical spacer and is also typically the part intended to contact the compression ring, because the flared out bottom covers the compression ring where putting a normal headset spacer there would look gappy. What can be confusing is that some headsets/bikes can come with one of these and also another, shorter “top cover” piece that you’d run instead of this, which also covers the compression ring but is for if you want to run slammed.
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It goes on top of the spacers to transition to the stem, can be seen here https://c02.purpledshub.com/uploads/sites/39/2019/03/bmc-roadmachine-01-1491578895686-1eki2g59tmwnn-57c541a.jpg?w=1029&webp=1
It’s a conical spacer and is also typically the part intended to contact the compression ring, because the flared out bottom covers the compression ring where putting a normal headset spacer there would look gappy. What can be confusing is that some headsets/bikes can come with one of these and also another, shorter “top cover” piece that you’d run instead of this, which also covers the compression ring but is for if you want to run slammed.