That is a USN/USAF pilot's survival signal flare launcher made by BuWeps (Bureau of Weapons of the USN). It is part of the MK 79 Mod 0 Illumination Signal Kit that would have been located in their survival vest, I believe. It uses the MK 80 flare cartridges. You can find them on firearm auction sites from time to time, the kits usually sell anywhere from $150 - $200, respectively.
Here are some good photos and info below.
The Mk 79 Mod 0 signal kit (fig. 4-5) consists of a Mk 31 Mod 0 signal projector, a plastic bandoleer that holds seven Mk 80 Mod 0 signals, and an instruction sheet. The kit is used by downed aircrew personnel as a distress signaling device.
Because it is small and lightweight, personnel can carry it in pockets of flight suits or in life rafts. The projector aims and fires the signals. Each signal contains a single red star. On activation, this star is propelled upward to a height of between 250 and 650 feet. The star burns for a minimum of 4 1/2 seconds.
To operate the device, you cock the projector firing pin by moving the trigger screw to the bottom of the vertical slot, and slip it to the right so that it catches at the top of the angular slot. After cocking the firing pin, remove a signal from the bandoleer and mate the projector with the signal. Now, rotate the projector clockwise until the signal is seated. Hold the projector overhead, pointed at a slight angle away from your body. While firmly gripping the projector, fire the signal by slipping the trigger screw to the left, out of the safety slot and into the firing slot.
NOTE: This first step is very important because the signal is threaded and screwed into the end of the projector. If you donÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢t cock the projector before screwing in the signal, the firing pin could be forced into the primer of the signal, possibly firing the signal prematurely.
I am not sure if they are considered destructive devices because people have been known to modify them to fire live rounds. But I guess they are aren't if they are being sold on auction sites. Check the BATFE site for yourself if you want to find out for sure.
Cool flare launcher, wish I had one!