This weapon is attached to the arm of the exoskeleton that encase the Coreeshi. it is activated by a keypad that is also attached to the armor.
It was capable of rendering the crew of Moya from their normal heights measured in feet to mere inches. The workings of the gun were never explained in the series but it can be determined that it used some technology that the Coreeshi alone had because of Sikozu's inability to understand how it was even possible.
It allowed the Coreeshi to shrink and hold prisoners hostage within capsules in their armor. An enemy couldn't kill them without risking harming their friends within. It also could be used defensively to shrink threats like explosives or attacking enemies which could them be squashed underfoot. ("I Shrink, Therefore I Am")