A makiwara is a device constructed so that a karate expert can practice full strength, uncontrolled, unfocused punches against a strong, resistant, padded target. The goal is to use the resistance to strengthen punching, and to prevent the constant practice of controlled air techniques from becoming habitual. The wooden post is not really the makiwara. The straw pad placed at the top of the post is the makiwara. However, since the most people call the whole thing a makiwara, and because there is no name for the entire device, a makiwara is also the wooden post and supporting base.
The goal of the makiwara is not to condition the knuckles, but rather to condition the muscles to the resistance of the board - the muscles that push forward from the legs, through the torso, the shoulder, and the muscles that straighten the elbow and wrist. What you want is a nice, soft surface with just the right amount of stiffness to it so that your blows are not absorbed and dampened by the pad, but rather by the board.
When you have learned all you can from your makiwara, you will not be able to hit it without hurting yourself. The goal is to become so effective at leveraging your body weight that you cannot resist the force of your own techniques.