What you're referring to is a Strange Mood!
A strange mood happens every so often when you have more than 20 dwarves, and can add an artifact to your fort, providing a peerless (or useless, depending on material) weapon, a sublime build-able option, or "Fortress Wealth Fodder" if the artifact is not build-able, wearable, or usable.
Specifically, Possessions, despite the advent of ghosts and other haunts, are only notable for the fact that the artifact is the only result of them -- unlike any of the other strange moods, they do not result in skill increase as Fey or Secretive moods do (enough experience to instantly push dwarves into legendary skill, possibly even up to legendary+5, the maximum skill level).
Dwarves usually build their artifacts out of favored materials and into favored objects -- perhaps you'll find that the dwarf in question is fond of amulets?