On the tool post is a milgrain tool.
More specifically, it is a lathe milgrain tool, to distinguish it from even smaller milgrain tools used by jewelers. This tool has a one quarter inch diameter wheel and a one eighth inch square shank. It is “female” pattern. There are also “male” and “rope” patterns available.
It is used as a knurl tool, pressed into the work.
I turned the spindle by hand.
Here is the pattern produced.
Before applying the milgrain tool, I made two grooves with the point of a carbide insert.
My plan is to use it to add decorative touches to a new reel design.
North Branch Reels 
Where di you bought this millgrain tool?
Olaf,
I bought it from an Ebay vendor; search for “lathe millgrain”. They are also available at contenti.com.
Dave
Dave are this not the same in size as Gesswein selling? http://www.gesswein.com/p-3029-large-millgrain-wheels.aspx?cpagenum=&sortfield=&sortdirection=&perpage=
Olaf
Olaf,
Yes, this is the same thing. Be sure to buy a “large wheel”. The smaller ones are not for use with a lathe.
Dave