A redemption machine is an arcade game or other coin operated device, that is designed around the concept of getting tickets, which are redeemed at a prize counter for a wide selection of fairly worthless merchandise.
A long time ago, there were only a few types of these machines, with any individual machine having a ninety percent probability of being a Skee-Ball machine. Soon after came Whac-a-Mole, basketball throwing games, and the one where you try and get the bowling ball to stay in the groove (/msg me if you know what that one was called).
A few years later coin pushers and all manner of random devices where you press a button to stop a light on a number became popular.
Now even video redemption machines are common (play a video game, and get tickets for your score). A few of the video ones are actually really good games, such as Chip Away, which is a trackball puzzle game. Nowadays redemption machines take up more floor space in the average arcade/entertainment venue than real arcade games do. If you don't believe me, then go visit Dave & Busters or Chuck E. Cheese and count the machines yourself.
Operators love redemption machines, they are as addictive as gambling machines and take in nearly as much money, without the 85 - 95 percent payout that a gambling machine must maintain. The payout (in cheap prizes), on these machines is much closer to 10 percent of the take, than it is to the 90 percent given out by the average gambling device.
Lets look at a real life example of just how much money these machines actually take in. Dave & Busters has coin pusher machines that pay out 10 tickets for every coin knocked over the edge. Now if you are good at coin pushers, then you can actually average 1 over the edge for every one put in. You get four coins for a dollar, so that makes 40 tickets for a dollar. For 2500 tickets you can get a stuffed animal with a retail value of around $20, but it would cost you $62.50 to win that $20 prize. But the prize probably only cost the operator $5, so they pocket $57.50, and you are left with a stuffed Kermit the Frog that you probably didn't even want in the first place.