This is a depiction of an antisemitic trope that has, thankfully, died out in the past few centuries, the last accusation being in 1836: two Jews engaged in "host desecration."
One of the tenets of Catholicism is belief in the miracle of transubstantiation: that the consecrated host (communion wafer) and communion wine become the literal and actual flesh and blood of Christ (without changing their physical characteristics). During communion you eat Christ in a sort of sacred cannibalism type deal. Protestants generally reject this idea, believing that Christ is "present" during Communion but not that that's actually his body.
Medieval Christians generally accepted the idea of "Jewish deicide:" that Jews as a people, both at the time and to the then-modern era, were responsible for killing Jesus. (Notwithstanding the fact that his death was narratively necessary for their whole deal and that Jesus said so himself.)
The idea was: Jews hated Jesus, and they would love to hurt him by any means. They would obtain a consecrated host by some manner, and proceed to torture it: stabbing it to re-enact the Crucifixion, cooking it, and so on, and so forth. The depictions of this throughout medieval artwork generally show the host bleeding as it is wounded.
This was a common accusation leveled against Jews for hundreds of years, and used as an excuse for numerous massacres, executions, expulsions, and various other persecutions. Prosecution of this "crime" often proceeded from the accusation of a single person, with no evidence; sometimes one or several Jews were executed for it, and sometimes entire Jewish communities were burnt at the stake.
Their reasoning numerous flaws in it, with one especially big one at the core; unfortunately, pointing it out basically never saved anyone: