This thing has always confused me, and as far as i can tell:

1. It was designed to look cool.
2. It's there to be a fakeout where you see Seph embrace it and then suddenly tear it apart.

In-universe I have no idea what purpose it could serve, and none of the fans are any wiser. It's very art deco and Metropolis inspired, and I wish there was more of that in the FF sequels. They seemed to town down that in sequels.