Older homes often have older appliances, some of which might not exist or even be helpful today. This water heater is a perfect example of that: at the top of it is a special compartment to warm pies, taking advantage of the water heater's warmth and getting two jobs done for the price of one. Nowadays, not many of us need a pie warmer since we have full-sized ovens that can pretty much do the same thing.
Although not very necessary today, it was common in old European houses. And honestly, we wouldn't be upset if we moved into a place and were surprised by this cute amenity.