This style of tap tap hammer toy was used by both of my older boys at their Montessori toddler classes. As Otto isn't currently attending a toddler class I thought I would try it with him at home. It turns out he loves it too.
I like it because of the fine motor skill work. Otto likes it because of the hammer and he is allowed to hit things! There is some risk involved which requires the toddler to handle the pins with care. It also requires a lot of self regulation and self control. If Otto threw the pins I would remove this toy straight away. But so far he's used it with respect and care.
It helps the child to build their coordination and concentration. It may be hard to see but the toddler has to work hard to get the pin inside the little hole in the wooden shape. Then more coordination is needed to hit the pin with the hammer.
At the moment Otto is just placing the shapes in a haphazard way. But in the future he can make a picture, make patterns or predetermined images. He can start to name the shapes and colours too.
All of this fine motor work prepares the hand for writing and is fabulous for building those little hand muscles.
I haven't linked to this product because there are many available and I don't have a preference. Be aware that this toy is usually rated three years plus due to small parts. While we keep this work on Otto's shelves, the pins are stored in a jar on a high shelf, I get the pins down when I see he has chosen this work.