Just purchased a Canadian 97 Jetta TD .... and while changing up the air filter i found this disconnected.

disconnected parts

hook'em back up

What does this puppy monitor ... I hooked it all back up ... and went for a spin. I didn't get any lights flashing in the dash.....
but if i felt anything different it felt like it was coasting longer from 100+ km/h
looks like it was connected between the turbo-charger and the vacum line that goes to the front of the engine that splits to the brake booster.
I wonder if this is wiring for the changeover switch discussed in this thread (picture links now obsolete unfortunately):
http://www.vwdiesel.net/phpBB/viewtopic.php?t=173QTD pointed out that very few AAZ-equipped cars came with EGR (just certain Passats), but they all had that wiring in place. If Quick TD notices this thread, maybe he can chime in. I'm guessing that thing was disconnected right from the factory, since you have no EGR.
It came from the factory with this setup connected. It is the wastegate/EGR changover valve. Plugging it in will probably not change the performance very much. All it does is pull open the wastegate at light throttle. On EGR equipped cars it also opens the EGR valve. I still have mine hooked up but with the switch on the top of the pump set to only come on at idle. It gives the wastegate a bit of "exercise" to keep it free and cools off the EGT's a bit quicker at idle.