Gents!

I am new to the boards but not to Volvo. My first car I've ever driven was a Volvo. I learned to drive in one and I've always loved them. My mom had a 740 Turbo wagon and my best friends mom had a 740 sedan turbo. Growing up these were the only two cars me and my buddies had access to. Lots of great memories joyriding those beasts.

My family went to a 940 Turbo wagon and my mom now has an S80. She picked it up used a little while back and she seems to enjoy it.

Here's our problem and I thank you in advance for your advice!
My parents were driving back from Vagas and my mom said she saw smoke coming out of the engine. They pulled over and saw this part:



had blow off, spilled oil everywhere, and caught fire to the fabric that wraps the firewall at the back of the engine. (Not sure if that's an S80 engine pic but the part looked the same n my mom's car)

My questions are:

1. What is this part?
2. What would cause it to pop off and spill oil everywhere?
3. My parents said there were actual flames/fire where the oil was. Is this a known issue?

Any advice or help is much appreciated. My mom is scared to drive the car. Is there an inexpensive fix for this problem?

Thanks again and good to be here!