Well, that's a coal burning fireplace, with the probably unlined chimney, it would be safer to burn what was intended - coal (bituminous lump coal specifically) Wood produces higher stack temps, flammable creosote, and sparks, coal does not.

It looks like a vent for a gas/oil/propane furnace or boiler in the basement - there wasn't an available flue, so a hole was knocked in the hearth of the firebox and a metal pipe run through, cheap and functional for the guys installing the furnace/boiler in the basement. So, you cannot just remove the pipe, you either have to connect the furnace/boiler to another available flue (if there is one) in the basement, or, you will have to powervent the furnace/boiler if you want to utilize the fireplace (and patch the floor of the firebox.

Given the size of the liner you could probably get another piece of b-vent in the chimney to run a gas fireplace. As Berlin pointed out, the appliance connected to the existing b-vent would have to be removed, the flue repaired (which with an old flue like that would mean a full length re-line) in order to burn wood. If you were to go forward with this, I'd start with analysis of the furnace or water heater connected to the "offending" pipe. It may be time to upgrade that furnace to a condensing hi-eff model and vent out the side wall with PVC.