When entertaining a young child who is learning English, I heard some people asking her
What is it?
when pointing to her finger.
I was surprised because I always learned to ask
What is this?
when pointing something (or that is there is a need to differentiate the distance, or in general separate the items).
Their rationale was that the answer will be "it is a finger".
Is the question "what is it?" correct when pointing something?
Bonus question: is there a (ideally - strict) grammatical rule for this case?
Note: I hoped another question would be a duplicate but the context is different (though it implies that there is no problem with "What is it?")