Old pseudobulbs eventually die off. When the leaves are gone and the pseudobulb withers it can be cut back. Your plant should produce new growth from near the base, but yours has also produced a keiki, the new growth you see from the middle of the pseudobulb. This is normal. When the keiki has roots at least an inch long it can be carefully removed and potted up on its own. Usually it is better to leave it on the parent plant longer if possible, but if the pseudobulb is withering and the plant isn't in great shape it might be time now.
Aside from the old pseudobulb withering, it looks like your plant might be dehydrated in general. If you are sure it is getting enough water you might want to check if the roots are healthy. It may need to be repotted.
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