People ask questions when they don't know something and want to know the answer, so interrogative word order signals that.
Why do that in the middle of a sentence? There's two ways to interpret this:
It serves as a form of emphasis - he/she really wants to know the answer to the "question." Hearing someone say this, you'd probably hear a shift up in pitch at the words "what is it", as though one would with any question, so it wouldn't sound jarring if heard.
English lets you put entire clauses with complete subjects/verbs in many spots where a particular function is needed. E.g. if you need a noun somewhere, you can use a single word that's a noun, or an entire phrase. A "linker" word like that, which etc. is sometimes needed.
Martha made me reconsider my position.
That we had no means of supporting ourselves made me reconsider my position.
It may seem a little weird to "copy" an entire question with it's original form as a clause, but since all the wh- words function as such "linker" words and introduce new clauses, you can understand the temptation to do it.
I couldn't understand how he can get away with that.
I really want to understand how can he get away with that.
Look at my costume and see if you can guess what I am.
I see your costume and am trying to figure out what are you.
You can somewhat get away with stuff like this in informal speech, but if you are not careful with your intonation it will sound wrong, and you definitely can't get away with it in writing or formal speech.