What is this curious slightly abstract item?
It is a sheet of 'waterslide decals'. It is an item that would be enclosed with a model vehicle, which, in this case is the "Canon Williams Team" race car. First you build the model car, then you apply the logos, numbers and other accent details provided by this sheet, so that it can look just like the real thing. Sponsors are a big part of racing & their colorful logos are everywhere--just like the year Sega was a sponsor & had some Sonic details on the car. (That's what year is here)

You can see finger waving Sonic, a white Sega logo in a few varieties & the "sega labeled Sonic leg/foot" that was applied on the bottom edge of the car that made it like cartoon-Sonic is 'driving' the car. The car itself is pictured elsewhere here on Gear in Sonic events. The model (if anyone builds it and sticks the stickers) may appear here too if it's added.

But what about that water slide? Waterslide is just the name, because they are not normal sticker-paper items. They are activated by water & then you 'slide' the backing off, leaving only the print/design which can't peel later. It is a bit fiddly and difficult to do them right, but the result is nicer than stickers when it is done well. It is also typical for models to have this type of sheet item. (It's too bad cigarettes got on there too because smoking is bad, but all the other brands are good or neutral)