The picture is of a subframe bushing and it is shot. Replace all four (big pain in the butt as they go in from the top, I think, like a 115 chassis). Replace the motor mounts, too, as they are very likely shot as well, and the engine will be sitting too low -- my 220D AC compressor was knocking on the fender when I replaced the subframe bushings!
You will have to elevate the car on jack stands NOT under the subframe, then remove the bolts on one side and lower the subframe on a floor jack. The old bushing may be stuck, be prepared to have to pry them out. Lubricate the new ones with silicone spray or dishwashing detergent (NOT oil) and slide them into the space between the subframe and the frame. You will get new "nuts" with them (the little metal tab sticking out of the hole in the frame above the bushing) and new bolts.
The first side is easy. The second side will require a substantial prybar to force the frame down far enough to get the old bushings out and the new ones in. You can remove all four at once if you have a cradle for your floor jack -- the engine and transmission are attached to the subframe, so be carefull -- you can make a real mess of things if you lower them too far. One side at a time is safer for you and the car. Keep your hands OUT of the space between the subframe and frame, please!!
1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!