This valve assy was fitted to my router. what's it supposed to do?

[Richard]

It depends on how it's been designed. If it is a venturi, then it should create a vacuum and draw fluid out an unpressurised container.
However it's maybe not a venturi, in which case it does need the fluid to be pressurised.

Only way to find out, is connect it to a suitably regulated air supply, and see if it sucks or not.

See if it sucks or suck it and see? LOL!

I did initially try connecting a pipe to the valve (top of pic) with the end in some coolant but it just blew bubbles!

There doesn't seem to be any venturi effect....

[cropwell]

The top one is probably the air inlet as it has a valve on it.

[m_c]

See if it sucks or suck it and see? LOL!

I did initially try connecting a pipe to the valve (top of pic) with the end in some coolant but it just blew bubbles!

There doesn't seem to be any venturi effect....

What pressure did you use?
If it is a venturi, and you used too high a pressure, the restriction of the outlet would cause it to blow air out the coolant inlet, instead of creating a vacuum.
Most of these things are designed to run around 1-3bar, so start with a pressure regulator fully wound off, then gradually increase the pressure.