A spacer between the top of the cylinder and the underside of the cylinder head is used to reduce compression ratio - on cars it used to be called a "compression plate". In the case of cars, there were at least two reasons I know of for it being done. In the case of the Ford "Y-block" V8, it was done on engines fitted to Australian-assembled cars because our fuel back then was lower octane than that required by the engine as normally built. The other reason I know of was to reduce power, because some driveline component wasn't up to the job otherwise. I won't give an example of that because it implies a criticism of the vehicle involved.
In the case of a reel lawnmower, I can only make pure guesses as to why it would have been done. One possibility is that the mower, which may have been based on a design centred on a smaller Villiers engine, might have been considered over-powered with an engine designed for a much less efficient rotary mower. Another is that the spectacularly poor-running Victa 2 stroke benefitted from weaker power pulses which might have de-emphasised the fact that they occurred so irregularly.
