That's the outboard well. If you clamp an outboard to the transom at that point, then the head of the outboard more or less fits in the well when you tilt it up. Also catches any nasty spills.
Looks like a great boat, if the price is right then go for it! From the way that the lines are set up under the cockpit, this was definitely used for racing. That's generally a good thing as most racers set their rig up for efficiency. But the DS1 rigging is so easy to change, I wouldn't worry about it. As you sail the boat, you'll learn what you might want to change. And this forum is here to help.
OTOH, the sails are probably beat to death. Soft as a diaper. Fine for casual sailing, but budget yourself for new sails in the next year or so. For now, it's just a point that you can use for haggling the price down! Good luck
Fair winds,
Tom