Small Toothed Wheel: A item you can Collect. It has no use (yet?).
There is also the similar Toothed Wheel, also useless (so far). It is just a regular sized Wheel.
Toothed Wheels are the remnants of the Clockworks after the Clockworks War.
Go to a Collecting Area, and buy a Collector and a battery from a Collecting Manager. Then going into the Collecting Area with your Collector equipped. click on the battery and hit start in the appeared screen. You will then start Collecting.