Hi, there:
The Dragon makes more sense if you've read Maguire's "Wicked" novel (and IMO I think they put it in there as a little bonus to people who've read it, so they'd get a little extra reference, and if you didn't read it, you can at least marvel at the nifty set piece).
It's somewhat elaborate, but in the beginning of the novel, Elphaba's Father is preaching out against a massive traveling machine called 'The Time Dragon', a huge mechanical dragon/clock which was going from town to town and (I think) telling the future and activities of the like. His own encounter with the Time Dragon (not to spoil it in case you haven't read the book) shakes him up a bit & if I remember correctly, ties in to Elphaba's rather mysterious background & condition.
There is slightly more to it than that, but that's the general idea, and it explains away both the Dragon itself and the gear/clock motif --- the entire story is taking place 'inside' the Time Dragon, helping to explain how they can travel back & forth in time and flashback during the course of the show. I do feel they should've tried to find some way to explain or justify it a bit more, as IMO it just seems like it should do more than it does (the dragon) --- but if you've read the novel, it's one of the few 'bonus' references during the show.
Hope this helped --- & since I've been harping on it for the past few graphs, if you get the chance, pick up the 'Wicked' novel...it's very intriguing to see the comparisons/contrasts between it and the show.
--- Joe T.
Laughing is a tonic. So forget crying. Cry, and you cry alone. Laugh and you...cry alone later. And remember --- always breathe. Even if I stop, you keep breathing out there, alright?