There seem to be be two versions. This one works with Doctor PC Junior, SF6(Prof. 1) and SF7 (Prof. 2). CDs were made with hundreds of SNES/SFC games on, see the Pirate section to see an example. It looks like the user had to place the CD in that plasic holder then put it in the drive.
This newer CD reader unit, the SFCD7, is for use with the Game Doctor SF7 (Professor SF2). Its designed for use with SNES CDs for fast loading of your favourite games, and also has the function of playing music CD's through the headphone jack. Its all controllable through the GUI of the backup unit too. A MPEG card is (was) being developed that allows you to play MPEG video CDs, that is installed into the SF7 itself. You can also play music CDs in the drive, and control the CD via a GUI interface (like playing music on the Sega CD)