In olden days this burnt onion was made in a chulla. That gave more flavor to the curry as compared to the modern gas burnt onion.
To make this, just slice off the root of the onion and keep it on the gas burner directly as shown in the picture. Let it cook till the outer skin on the onion gets burnt. Little juice will start oozing out. Switch off the gas and wash it under running water to remove the burnt skin. The inner flesh of the onion is used in masalas.