What is going on in this picture and what is the bag for?
Although I cannot tell for sure since the picture is not given any context, this appears to be a picture of a group of men about to tar and feather another man. This is most likely a depiction of something that would have happened in colonial America.
When the British government started to tax the colonists more heavily after the French and Indian War, the colonists became very unhappy. This was particularly true of the colonial reaction to the Stamp Tax. The colonists tarred and feathered tax collectors as a way of trying to deter them from actually enforcing the law. This was done to American tax collectors in the Whiskey Rebellion as well.
Tarring and feathering involved painting a person (in this case, the naked man) with pine tar and then rolling them in feathers. This was meant to be at least somewhat painful and very humiliating. This means that the bag in the picture most likely contains feathers to put on the man who is being tarred and feathered.
So, this appears to be a picture of a man being tarred and feathered, meaning that the bag is full of feathers.