Terracotta figures such as this have traditionally been called dolls. Small-scale representations of human figures, mostly women, exist in a great variety of forms; they may have movable limbs, their limbs may be truncated as here, and they may have any number of attributes. Their role, therefore, certainly extended beyond child's play to rituals, the theater, and certainly the grave.
Richter, Gisela M. A. 1928. "Recent Accessions of the Classical Department." Bulletin of the Metropolitan Museum of Art, 23 (3): p. 81.