What is this capped pipe that is sticking out of the side of my valve?

The capped pipe is called a housing vent port. Rotor pockets can sometimes contain a volume of pressured air, which can impede material flow into the airlock inlet, reducing your efficiency. Also, in conveying systems that run at 6 PSI and higher, large releases of air up the return side of the airlock can cause pulsing in the material flow into the conveying line. Using a vent helps solve both of these issues, and is also helpful in improving your fill efficiency.