The Nut Sorting Room is where squirrels chew on nuts, braking the good nuts and bringing the bad nuts down a garbage chute. In the film Charlie and the Chocolate Factory, they push Veruca Salt and her father down the chute.
When asked why he used squirrels and not Oompa Loompa’s to crack the nuts, Wonka explained it is because only squirrels are delicate enough and skilled enough creatures to get the nuts out of their shells intact. Oompa Loompas would break them. For whatever reason he wants the nuts completely whole.