The Jolly Jug was popular in the early to mid 19th century. Elsmore & Forster in Staffordshire were one of the firms that manufactured such items.
When you fill the jug with water, you can pour from the spout in the normal way, but you can also make the liquid come out through a hole in the base of the jug. When you are pouring from the bottom of the jug, you can also make the flow stop, apparently at will.
Inside the jug is a hole which connects to a tube that runs up one side of the handle. If you look at the underside of the jug, you see a second hole, and this hole connects to a separate tube that runs up the other side of the handle. Towards the top of the handle the two tubes meet. There will also be a small air hole at the top of the handle, just a couple of millimetres across.
To make the siphon action work, you need to tilt the jug back slightly, keeping your finger over the little hole in the handle. Initially there will be liquid in one of the tubes in the handle - the tube that connects to the hole INSIDE the jug. When you tip the jug back slightly, the liquid will move up that tube and down into the other tube that connects to the hole on the underside of the jug. You now have a working siphon, and liquid will continue to flow from the bottom of the jug until you remove your finger from the little hole in the handle. This will break the siphon, and the liquid flow will cease.
Inscribed " James Hailstones 1864"for more information