I can confirm that the UL points to the Large Wreck in the system. I tried it with a friend one side of the moon in the Mel 22 Sector system, then supercruised to the other side of the moon and tried it again - it reoriented itself and its pointer to the moon. I'm on Xbox so it'll take a bit for the screenshots and videos to upload, but there we have it. It's a Large Wreck Locator.
HOWEVER! How does this even begin to be useful if you need to play the sound from the wreck in the system to activate it? I mean, that means you've already found the wreck in the system, so why would you need it pointing out again?
ALSO! The Unknown items don't need to have gone through the machine first, Dreamstate says the UL works on its own, but before we knew this, I tried with a free floating UA to go with my UL and UP, and got it to point.