Couldn't this also mean "what does that do?" Like, if I were pointing at a machine I didn't recognize?
I wonder if 'What is he doing?' is correct? It seems to mean the same thing...
No. "What is he doing?" is in the present continuous tense and would translate to "वह क्या कर रहा है ?". It is asking what the person is doing at the present moment. On the other hand "वह क्या करता है ?" is in the simple present tense and is asking about the person's general habits, occupation etc. Some languages don't make a distinction between these two tenses but both English and Hindi do.